UNIT I –STRATEGIC AND PROCESS

A. Conceptual framework for strategic management,

B. The concept of strategy and strategy formation process - Formal Strategic
planning process,
UNIT II –COMPETITIVE ADVANTAGE
1. External environment –
2. Porter’s five forces model –
3. Strategic groups competitive changes during industry evolution
4. Capabilities and competencies- core competencies –
5. Low cost and differentiation generic,

UNIT III – STRATEGIES

UNIT IV – STRATEGY IMPLEMENTATION & EVALUATION
UNIT V –OTHER STRATEGIC ISSUES
 STRATEGY AND PROCESS

• INTRODUCTION
o Strategy word derives from the greek word stratçgos, which derives from two
words: stratos (army) and ago (ancient greek for leading). Stratçgos referred
to a ‘military commander’ during the age of Athenian Democracy. Strategy -
originally a military term, in a business planning context strategy/strategic
means/pertains to why and how the plan will work, in relation to all factors of
influence upon the business entity and activity, particularly including
competitors (thus the use of a military combative term), customers and
demographics, technology and communications.
 LEARNING OBJECTIVES

After learning this unit you must be able to:

• Understand the concepts of strategic management
• Analyze the strategic formation process
• Explain the strategic planning process
• Describe the role of corporate governance
• Know the corporate governance responsibilities for society
1.1 CONCEPTUAL FRAMEWORK FOR STRATEGIC MANAGEMENT

• Definition of strategy
Johnson and Scholes (Exploring Corporate Strategy) define strategy as
follows:
“Strategy is the direction and scope of an organization over the
long-term: which achieves advantage for the organization through its
configuration of resources within a challenging environment, to meet
the needs of markets and to fullfil stakeholder expectations”.
• In other words, strategy is about:

 Where is the business trying to get to in the long-term (direction)

 Which markets should a business compete in and what kind of activities is involved in such markets?
(markets; scope)
 How can the business perform better than the competition in those markets? (Advantage)?
 What resources (skills, assets, finance, relationships, technical competence, and facilities) are
required in order to be able to compete? (Resources)?
 What external, environmental factors affect the businesses’ ability to compete?(Environment)?
 What are the values and expectations of those who have power in and around the business?
(stakeholders)
 1.2 THE CONCEPT OF STRATEGIC MANAGEMENT
• CONCEPT OF STRATEGIC MANAGEMENT
Strategic management is the art and science of formulating, implementing and evaluating cross-functional
decisions that will enable an organization to achieve its objectives. It is the process of specifying the
organization’s objectives, developing policies and plans to achieve these objectives, and allocating resources to
implement the policies and plans to achieve the organization’s objectives.
Strategic management, therefore, combines the activities of the various functional areas of a business to achieve
organizational objectives. It is the highest level of managerial activity, usually formulated by the Board of
Directors and performed by the organization’s Chief Executive Officer (CEO) and executive team. Strategic
management provides overall direction to the enterprise and is closely related to the field of organization
Studies.
• “Strategic management is an ongoing process that assesses the business and the industries in which the
company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential
competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has
been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new economic environment., or a new social, financial,or
political environment.” (Lamb, 1984:ix)
 1.3 BIRTH OF STRATEGIC MANAGEMENT

Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early
contributors to the literature, the most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor
Ansoff, and Peter Drucker.
. Alfred Chandler recognized the importance of coordinating the various aspects of management under one all-
encompassing strategy.
. In 1957, Philip Selznick introduced the idea of matching the organization’s internal factors with external
environmental circumstances. This core idea was developed into what we now call SWOT anlysis by
Learned,Andrews,
. Igor Ansoff built on Chandler’s work by adding a range of strategic concepts and inventing a whole new
vocabulary. He developed a strategy grid that compared market penetration strategies, product development
strategies, market development strategies and horizontal and vertical integration and diversification strategies.
He felt that management could use these strategies to systematically prepare for future opportunities and
challenges. In his 1965 classic Corporate Strategy, he developed the gap analysis still used today in which we
must understand the gap between where we are currently and where we would like to be, then develop what he
called “gap reducing actions”.
. Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career
spanning five decades. His contributions to strategic management were many but two are most important.
Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship
without a rudder. As early as 1954 he was developing a theory of management based on objectives. This
evolved into his theory of management by objectives (MBO). According to Drucker, the procedure of
setting objectives and monitoring your progress towards them should permeate the entire organization,
top to bottom. His other seminal contribution was in predicting the importance of what today we would
call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the
consequences of this for management. He said that knowledge work is non-hierarchical. Work would be
carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.
Ellen-Earle Chaffee
In1985, Ellen-Earle Chaffee summarized what she thought were the
main elements of strategic management theory by the 1970s:

• Strategic management involves. adapting the organization to its

business environment.
• Strategic management is fluid and complex Change creates novel
combinations of circumstances requiring unstructured non-repetitive
responses.
• Strategic management affects the entire organization by providing
direction.
• Strategic management involves both strategy formation (she called it
content) and also strategy implementation (she called it process).
• Strategic management is partially planned and partially unplanned.
• Strategic management is done at several levels: overall corporate
strategy, and individual business strategies.
• Strategic management involves both conceptual and analytical
thought processes.
 1.4 STRATEGIC ANALYSIS
• PEST Analysis - a technique for understanding the “environment” in which a business operates

• Scenario Planning - a technique that builds various plausible views of possible futures for a business

• Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry

• Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users

• Directional Policy Matrix - a technique which summarizes the competitive strength of a businesses operations in specific markets

• Competitor Analysis - a wide range of techniques and analysis that seeks to summaries a businesses’ overall competitive position

• Critical Success Factor Analysis - a technique to identify those areas in which a business must outperform the competition in order
to succeed

• SWOT Analysis - a useful summary technique for summarizing the key issues arising from an assessment of a businesses “internal”
position and “external” environmental influences.
 1.5BENEFITS OF STRATEGIC MANAGEMENT

In short, the most highly rated benefits of strategic management are:

 Clarity of strategic vision for the organization
 Focus on what is strategically important to the organization
 Better understanding of the rapidly changing business environment.

Strategic management need not always be a formal process. It can begin with answering a few simple
questions:

1. Where are we now?

2. In no changes are made, where will we be in the next one year? Next two years? Next three years?
Next five years?
 CORE CORE
1. The need is now to distinguish between long-range VALUES
planning and strategic planning. PURPOSE
2. The importance of strategic management in setting the
directions for growth of organizations is being
increasingly realized these days.
3. The evolution of objectives after setting directions for
growth of organisations has become necessary. BUSINESS
4. The technique of strategic management is used as a VISION
major vehicle for planning and implementing major
changes in organisation.
5. The implementation of the strategic plans needs good
teamwork and understanding of the concept at grass
root.

CORE
GOALS
 1.6 VARIOUS APPROACHES OF STRATEGIC MANAGEMENT
In general terms, there are two main approaches, which are opposite but complement each other in some ways,
to strategic management:
• The Industrial OrganizationalApproach
• Based on economic theory — deals with issues like competitive rivalry, resource allocation, economies
of scale
• Assumptions — rationality, self discipline behaviour, profit maximization

• The Sociological Approach

• Deals primarily with human interactions
• Assumptions— bounded rationality, satisfying behaviour, profit sub-optimality.An example of a
company that currently operates this way is Google.
Strategic management techniques can be viewed as bottom-up, top-down, or collaborative processes. In the
bottom-up approach, employees submit proposals to their managers who, in turn, funnel the best ideas further up
the organization. This is often accomplished by a capital budgeting process. Proposals are assessed using
financial criteria such as return on investment or cost benefit analysis. The proposals that are approved form the
substance of a new strategy, all of which is done without a grand strategic design or a strategic architect. The
top-down approach is the most common by far. In it, the CEO (such as Don Sheelen, Jeff Bezos and Samuel J.
Palmisano) possibly with the assistance of a strategic planning team, decides on the overall direction the
company should take. Some organizations are starting to experiment with collaborative strategic planning
techniques that recognize the emergent nature of strategic decisions.
 1.7 STRATEGYAND STRATEGY FORMATION PROCESS
• 1.7.1 Strategic Management Processes
The strategic management consists of different phases, which are sequential in nature. There are four
essential phases of strategic management, they are process. In different companies these phases may
have different, nomenclatures and the phases may have a different sequences, however, the basic
content remains same. The four phases can be listed as below.

1. Defining the vision, business mission, purpose, and broad objectives.

2. Formulation of strategies.
3. Implementation of strategies.
4. Evaluation of strategies.
 STRATEGY FORMULATION
. Develop/review mission-vision-
Feedback long term objectives
.Conduct Internal and external
nassessment
. Set selection creteria & select strategy

STRATEGY IMPLIMENTATION
Feedback . Allocate appropriate resources
.Execute selected strategy

STRATEGY EVALUATION
.Set contrôl processes
Feedback
.review & assess execution
. Take corrective action when
necessary
• Strategic management process that could be followed in a typical organization is presented in .The
process takes place in the following stages:
1. The Strategic Planner has to define what is intended to be accomplished (not just desired). This will
help in defining the objectives, strategies and policies.
2. In the light of stage I, the results of the current performance of the organization are documented.
3. The Board of Directors and the top management will have to review the current performance of the
documented.
4. In view of the review, the organization will have to scan the internal environment for strengths and
weaknesses and the external environment for opportunities and threats.
5. The internal and external scan helps in selecting the strategic factors.
6. These have to be reviewed and redefined in relation to the Mission and Objectives.
7. At this stage a set of strategic alternatives and generated.
8. The best strategic alternative is selected and implemented through programmed budgets and
procedures.
9. Monitoring, evaluation and review of the strategic alternative chosen is undertaken in this mode.
This can provide a feedback on the changes in the implementation if required. As can be seen, this
provides a rational approach to strategic decision making and it can be successfully practiced by
Indian organizations, which now have to operate in a competitive environment.
 1.7 STRATEGYAND STRATEGY FORMATION PROCESS
• 1.7.2 Top Management Decisions On Strategic Issues
To establish the vision of the firm, stating of corporate objectives, and
strategic thrust areas, defining a comprehensive corporate philosophy
and values, identifying the domains in which an organization would
operate, learning and recognizing worldwide business trends, and
allocation of resources in line with corporate priorities, are some of the
key areas wherein top management of organisations take decisions.
Let us now look at the domain of top management?
Exemple « amazone »
1.7.3 Strategic Issues Likely To Have Long Term Impact
Strategic decisions for implementing a course of action have broad
implications and long term ramifications and the people of an
organisation have to commit themselves to the decisions and plans for
a long period of time.
Once a firm takes strategic decisions and implements the action
programs, the impact is seen slowly on its competitive image and the
advantage tied to the particular strategy start pouring in. The
companies becomeknown in certain markets, products, or technologies
or the decisions may adversely affect the previous progress. In today’s
business world, where changes are by leaps and bounds, some
organisations may decide for radical changes through reengineering of
their business processes to gain strategically better position
• Strategic Directions are Futuristic
Strategies are essentially for the future. Strategic decisions are taken
based o forecasts that are in turn based on available data on trends.
The organisation tends to change the environment and the same
environment makes an impact on the organisation.
The firms have to define their strategic position with regard to the
environment and decide strategies that will take it to the desired
position. The firms are part of the system, where customers, stake
holders, competitors etc. exist and the firm cannot remain insulated
from these determinants of the external environment
 1.8 STRATEGY PLANNING PROCESS
Strategic Planning Model
Elements In Strategic Management Process
The steps have logical connectivity and hence these are sequential. These
steps can be illustrated with the help of a flow diagram. The following
discrete twelve steps can be considered as comprehensive.
1. Defining the vision of the company
2. Defining the mission of the company
3. Determining the purposes or goals
4. Defining the objectives
5. Environment scanning
6. Carrying out corporate appraisal
7. Developing strategic alternatives
8. Selecting a strategy
9. Formulating detailed strategy
10. Preparing a plan
11. Implementing a strategy
12. Evaluating a strategy
 MISSION &
OBJECTIVES

STRATEGY PLANNING PROCESS

ENVIRONMENT
SCANNING

STRATEGY
FORMULATION

STRATEGY
IMPLIMENTATI
ON

EVALUATION
AND CONTROL