Strategic Management

Introduction

The word ‘strategy’ is derived from a

Greek word ‘strategos’, which means
generalship – the actual direction of
military force.


Literally, the word ‘strategy’ means the

art of the general.

 Definition of Strategy
Alfred Chandler, the author of Strategy and
Structure says,
 “Strategy is the determination of the
basic long-term goals and objectives of an
enterprise, and the adoption of courses of
action and allocation of resources necessary
for carrying out these goals”.


William Glueck says,

 “Strategy is a unified, comprehensive and
integrated plan designed to assure that the
basic objectives of the enterprise are
Components of Strategy

Objectives
Goals
Synergy
Common threat
 What is Strategic
Management?
 William Glueck defines strategic
management as “a stream of decisions and
actions which leads to the development of an
effective strategy or strategies to help achieve
corporate objectives”.
 Strategic management consists of the
analysis, decisions, and actions an
organization undertakes in order to create and
sustain competitive advantages.
The definition captures two main elements:

First, the strategic mgt. of an organization

entails three ongoing processes: analysis,
decisions, and actions.
 Strategy vs. Strategic
Management
Strategy Strategic management

A series of goal-directed decisions Analyze current situation

and actions matching an Develop appropriate strategies
organization’s skills and resources Put strategies into action
with the opportunities and threats in Evaluate, modify, or change strategy
its environment.
Strategy involves: Strategic management involves:
Organization’s goals Planning
Goal-oriented action Organizing
Related decisions and actions Implementing
Internal strengths Controlling
External opportunities and
threats
Phases in Strategic
Management
A comprehensive model of the strategic management
process

Strategic control
 A comprehensive model of the strategic
management process

1.Strategy formulation
 Business definition, mission, purpose, and objectives
 Environmental appraisal
 Organizational appraisal
 Strategic alternatives and choice
2.Strategy implementation
 Project implementation
 Procedural implementation
 Structural implementation
 Functional implementation
 Behavioural implementation
3.Strategy evaluation
4.Strategy control
3.
Structure of Strategic
Management
Mission
The mission spells out what the
ambitions of the firm are, where
exactly it seeks to reach and what it
would like to be in the future.
Reasons why corporate define
mission

It conveys to the general public what the

company want to achieve.


It conveys to the employees that there

are business opportunities within the
broad area.
 Characteristics of a Mission
Statement
Define current business activities:
 Three dimensions of defining a business







Highlights boundaries of current business

Conveys Who we are, What we do, and Where we
are now

Seven Characteristics of Mission
Statement

Feasible
Precise
Clear
Motivating
Distinctive
Indicate major components of strategy
Indicate how objectives are to be
accomplished
 Examples of Mission
 Microsoft Corporation:
 “Empower people through great
software anytime, anyplace, and on
any device”.


 Otis Elevator:
 “Our mission is to provide any

customer a means of moving people

and things up, down, and sideways
over short distances with higher
reliability than any similar enterprise
in the world”.
 Example of Mission
 American Red Cross:


 “The mission of the American Red

Cross is to improve the quality of
human life; to enhance self-reliance
and concern for others; and to help
people avoid, prepare for, and cope
with emergencies”.
 What does mission do?
The mission directs the entire planning of the
corporations.
Example: When AT&T stated in its initial years

that its mission was “to give a telephone

to every American”, it set the pace of
AT&T’s growth. AT&T invested heavily and
grew rapidly. The guiding philosophy was that
it should fast move in the direction of its
mission.
Later when AT&T refined its mission as one of

“connecting people any time, any

where”, that became the guiding principle
for AT&T’s activities. Growth plans,
Mission guides the formulation of all
objectives of the corporation.
The mission communicates the corporate
vision to everyone.
Serves as the reference point in evolving the
objectives as well as the strategies of the
firm.
Helps the people at various levels in the
corporation understand in what direction
they should move.
Helps the firm to make sense out of the
changes in the environment and to decide
which opportunities to tap.

Objectives
Objectives are open-ended attributes
that denote the future state or
outcome.


Objectives are predefined set of goals.


 Role of Objectives
Define the organization's relationship with its
environment.
Provide the basis for strategic decision
making.
Provide the standards for performance
Characteristics
appraisal. of Objectives
U n d e rsta b le , C o n cre te & sp e cific , R e la te d
to a tim e fra m e , M e a su ra b le & co n tro lla b le ,
C h a lle n g in g , Set w ith in co n stra in ts,
co rre la te w ith e a ch o th e r.
How objectives are set?
Findings from the environmental
appraisal
Findings from the internal appraisal
Appraisal of the resource position
Appraisal of the health of existing
business portfolio
The currently achievable level of
performance
The extent of growth desired by the
corporation
Examples of objectives
For Du Pont:
 “Leadership in chemical technology and
continuous new product development are
major objectives”.


For Intel:
 “Product innovation is the main objective”.
 Areas where corporate objectives
have to be set
Growth in assets, in revenue, in profits
Example: ITC


Market share
Example: For Colgate India, market share is one


of the key corporate objectives. It believes that

in toothpaste, it should always have a minimum
of 50% market share.


Flexibility of business portfolio

Example: ITC


 Contd…

Human resources
Example: Computer software firm Infosys
holds development of a cadre of software
professionals as a major corporate objective.
Corporate image
Example: Tatas lays great emphasis on the

corporate image of the group.

Social responsibility
Example: Tatas participate in the
rehabilitation of handicapped children.
Tata Tea runs agriprojects in the hills of
Munnar, where handicapped children are
given purposeful employment.

Strategic Decision Making

Forms the core of Strategic

Management
Approaches to Strategic
Decision Making

Five approaches to strategic decision making:



1.Formal structured approach

2.Intuitive anticipatory approach
3.Entrepreneurial opportunistic approach
4.Incremental approach
5.Adaptive approach



 1. Formal-structured Approach
This approach involves systematic planning and
set procedures.
Different types of planning systems such as
strategic planning, corporate planning or long-
range planning are used.
Example: Larsen & Toubro (L&T) adopts a formal

strategic planning system and follows a three-

stage process.
1.The first stage is the diagnostic phase involving
the setting of corporate mission, objectives
and goals, and SWOT analysis by each of the
business groups in the company.
2.The second stage deals with providing directions
through the choice of alternative strategies to
be adopted.
 2. Intuitive-anticipatory
Approach
This approach is based on the intuition of,
usually, a single person who is the
promoter or chief executive of an
organization.
He anticipates the future and takes strategic
decisions accordingly.
The basis of decision-making is intuition,
judgement or hunch, which are the result of
long years of experience in dealing with a
variety of strategic problems.

 Contd…
Example: Hindustan Lever Ltd.
The company may adopt an intuitive approach
in the initial years. An early realization was
there at Hindustan Lever, during the time of
Prakash Tandon (who was the Chairman), that
“a foreign company in India could not
indefinitely carry on a low-tech but highly
profitable business, without numerous
awkward question being asked both in
parliament and in government”.
Based on this fundamental intuition, Hindustan

Lever derived its mission from the question:

‘What could a foreign company do to help
India?’
Such an anticipation led the company from its
3. Entrepreneurial-opportunistic
Approach
This approach is based on the perception of
opportunities, diagnosing them for the
generation of alternatives, analysing the
consequences and selecting the course of
action that would best meet the objectives.
Example: Dhirubhai Ambani, the founder
chairman of the Reliance group of companies,
typifies the adoption of the entrepreneurial-
opportunistic approach. Starting as a humble
office member of staff in Burmah Shell, Ambani
moved into spices exports and then to nylon
yarn trading. It is in this business that he, in the
early 60’s, realised the importance of synthetic
fabrics. Seizing upon the opportunities, Ambani
 4. Incremental Approach
The incremental approach involves limiting the
focus of strategic decision-making to a few
alternatives at a time, that differ only
marginally from one another. The choice of the
best alternative is based on an iterative
process of continually redefining problems so
as to make them manageable.
Most public sector co’s. in India, in their
strategic decision-making, exhibit the adoption
of an incremental approach. Owing to the
various pulls and pressures between which
public sector co’s. typically operate with
regard to their objectives and goals, the
strategic decision-making is based on
negotiated settlement among different groups.
Steel Authority of India Ltd., Bharat Heavy
 5. Adaptive Approach
How to change the decisions with the change in
circumstances.
Circumstances are defined in terms of the
environment. For an environment that is
perceived to be stable, strategic decisions are
based on certainty. Where stability is less, and
the future is risky, contingency planning
systems are adopted. In an uncertain
environment, the emphasis is on building up
capability to respond to changes as and when
they occur.
Example: ITC Ltd.

The corporate philosophy is stated to be based

on national objectives and priorities. The

strategic decision of diversifying into hotel
industry is explained through the need to earn