*STRATEGIC MANAGEMENT

Prof Ashish K Mitra

 Objective of the Course

Strategic Management, forms a capstone

course that helps students to view the
company as a whole and make company
wide strategic decisions.
 Having acquired basic knowledge in the
functional areas of Finance, Marketing, HR,
Operations & IT in the first year of MBA course,
in the Strategic Management course, students
are introduced to the concepts of Strategic
Management process involving
formulation of company vision, mission, including
broad statements about its purpose, philosophy, and goals
analysis of the external business environment
analysis of internal capabilities & competencies
Identifying desirable options & tools for making strategic choices,
students are given exposure to various types of competitive
strategies used; and ways to build competitive advantage for a
company.
Scope of Corporate Strategy vs Business vs functional Strategies
 Challenges facing strategy making in new
millennium
Processes for Implementation of Strategy
Need & processes for Corporate restructuring,
strategic alliances, JVs , M&A
Strategic tools for helping in the process of
Strategy Implementation / business
performance management
Some contemporary & evolving thinking in
the area of Strategy Management
Evaluation Guidelines
The Students will be evaluated on the
following criteria:
Class participation/ case studies !
Examination / Quiz / Assignments ! 40%
Live Project Work !

Mid Term examination 20%

End term examination 40%

Evolution of Strategic Management course
It has origin in the course titled Business
Policy, first started in Harvard B-School in
1930s
In 1959 2 studies sponsored by Ford
Foundation and Carnegie Foundation
recommended that Business Policy course
would give students an opportunity to put
together what they have learned in separate
fields and utilize this knowledge in analysis of
complex business problems
Thereafter made mandatory in all US business
schools
Nomenclature evolved : Business Policy Corporate
/Business Strategy Strategic Management
Why study Strategic Management?
Strategic management is a capstone course which helps
students to view the company as a whole
It is broad and integrative in nature integrates functional
knowledge of finance , marketing, HR , Operations etc
Draws rich inputs from several disciplines such as
economics, psychology, sociology etc.
Nature of Strategic Management is changing today all
managers, regardless of their organizational level or their
functional specialty are becoming more involved in
helping to formulate and implement strategies for entire
business
Strategy making is not an one time event, but work in
progress
 Strategic Management is now a days not limited to elite
strategists or group of strategic planners
Legendary GE Chief , Jack Welch used teams of bright
fresh Management Trainees to come up with plans to
destroy GEs businesses
Evolution of Strategic Thinking
Study of Strategic Management as a formal academic
discipline really took of in late 1960s / early 1970s.
Some eminent thinkers :
Igor Ansoff
Peter Drucker
Henry Mintzberg
Michael Porter
Kenechie Ohmae
Sumantra Ghoshal
C K Prahalad
Introduction to Strategic
Management Process
Prof Ashish K Mitra
Role of Strategy

Strategy is about winning - not only in

business context, but also in relation to other
fields of human endeavor, including warfare,
entertainment, politics, and sports.
Strategy is however not a very detailed plan or
detailed program of instructions;
it is a unifying theme that gives coherence and
direction to the decisions and actions of an
organization or of an individual
 Strategys Military Roots
Word Strategy comes from a Greek word
strategia , means a General
Roots in Military art & science of directing
Battlefield strategies to gain an edge
Exploit weak spots
For Business organizations a Game plan for
achieving its objectives and mission
Academic Origins of Strategic Management
Economic theory
Early organizational studies
Definition of Strategy in business context

A series of goal-directed decisions and actions

matching an organization's skills and resources
with the opportunities and threats in its environment

By strategy, most managers mean large scale, future oriented master plans
for interacting with the competitive environment to optimize achievement of
organization objectives

Strategy is a driver of Competitive advantage and Superior profit. Thus

ensuring Firms Long term prosperity.
Birth of Strategic Management concepts
Sophistication in Mgmnt processes - post War II
Increased number of competitors
Greater international trade, uncertainty
Problems in co-ordinating decisions & maintaining
control in increasing large & complex enterprises
Expanded role of regulations
1960s era of Long Range/ Corporate planning :
budgeting processes etc were blended with
external forecasting/considerations
Thereafter during the 1970s and 1980s
Becomes distinct academic field
Research focus on strategic decisions vs.
performance
Brief history of evolution of Strategy
In 60s & early 70s Strategy largely meant Corporate
Planning / Long Range Planning to meet diversification &
growth needs of large corporations
From mid 70s Shift from Corporate Planning to strategy
making, focus on positioning the company in markets in
relation to competitors. Through late 70s/ most of 80s ,
focus was on external environment
In late 80s /1990s Additional focus on aspects related
to Internal resources & capabilities, developing core
competence
In new millennium increased speed of changes
hyper-competition, information revolution, increased
competition through globalization, disruptive technologies
like internet, e-commerce. Need for strategic innovation
in the new economy & self learning organizations
Strategy as a driver of competitive advantage and
superior profit. Firms Long term prosperity.
Phase I :Era of Corporate planning ( Long
Range planning)
Corporate planning evolved during late 1950s and
early 1960s, to coordinating capital investment
decisions that required a longer planning horizon than
the standard annual budgeting process - during a period
of stability and expansion.
Long-term planning based on economic and market
forecasts became a central task of top management.
The typical format was a five-year corporate planning
document that set goals and objectives, forecast key
economic trends , established priorities for different
products and business areas of the firm, and allocated
capital expenditures.
The primary emphasis of corporate planning during the
1960s and early 1970s was on the diversification
strategies through which large corporations pursued
growth and security. ( scenario planning at Shell)
 Igor Ansoff, widely recognized as one of the founding
figures of the new discipline of corporate strategy, went
as far as to define strategy in terms of diversification
decisions. ( concepts of Product-Market matrix , SWOT, Gap
analysis, Synergy)
Scientific techniques of decision making, including cost
benefit analysis, discounted cash flow appraisal, linear
programming, econometric forecasting, and
macroeconomic demand management.
Argument that scientific decision making and rational
planning by corporations were superior to the haphazard
workings of the market economy . Rational planning for
diversification & expansion better than opportunistic
growth
 Phase II :Evolution from Corporate Planning to
Strategic Management (with major focus on external environment)
During the 1970s, business environment changed. Many
diversifications (especially unrelated) failed to for deliver the
anticipated benefits / synergies
Oil shocks of 1974 and 1979 ushered in a new era of
macroeconomic instability, combined with increased
international competition from resurgent Japanese,
European, and Southeast Asian firms.
The result was a shift in emphasis in Strategy Making
from primarily planning to major focus on positioning
the company in markets and in relation to competitors
in order to maximize the potential for profit.
Competition as the central characteristic, and
creation of competitive advantage emerged as the
primary goal of strategy.
Strategy as fit between goals , external opportunities &
threats, and internal capabilities
 Strategy quest for competitive advantage
This shift of attention toward business performance -
(during the late 1970s and into the 1980s), the focus
was on firms external environments through analysis
of industry structure and competition.
Michael Porter of Harvard Business School pioneered the
application of industrial organization economics to
analyzing the determinants of firm profitability.
Meanwhile, at the Boston Consulting Group, the
determinants of profitability, differences within industries
were under investigation their studies pointed to the
critical role of market share and economies of
experience.
Phase III : Interest towards internal aspects of firms
During the late 1980s and early 1990s, continued
research in the role of strategy in building competitive
advantage resulted in an Increased emphasis and
interest toward the internal aspects of the firm.
Developments in the resource-based view (RBV) of the
firm and organizational competencies and capabilities
pointed to the firms resources and capabilities as the
primary source of its profitability and the basis for
formulating its longer-term strategy.
This emphasis on the internal resources and
capabilities of the firm represented a substantial shift in
thinking about strategy. Prior to the 1990s, the emphasis
of strategy was a quest for optimal positioning ,ie;
companies needed to locate within the most attractive
markets where they should seek to become market
leaders. Concept of Core Competence, Strategy as
stretch, role of Foresight, vision gained prominence.
 Resource Based View of strategy calls for deep
analysis of what a companys competencies
were, and then continuously look for new market
opportunities to exploit its existing resources and
competencies. Also work to further strengthen
existing competencies and develop or acquire
new ones to meet current and potential market
needs.
In Porters view of strategy, a company was a
portfolio of products and businesses. C K
Prahalad & Hamel saw company as a portfolio
of resources and competencies.
 Third stage of competition - the competition for dreams
/ aspirations : The energy in a company to compete for
products & businesses, compete for creating
competencies comes from the dreams & aspirations sold
by leadership which creates exciting sense of purpose
in all stakeholders.
Strategic Intent provides the emotional and intellectual
energies to an organization to drive on a sustained basis
towards future market leadership
Sumantra Ghoshal, in his book World Class in India
says In order to win, companies must win at three very
different stages of competition : the competition for
markets, the competition for competencies and
competition for dreams.
Some more Definitions of Strategy
Alfred Chandler (Strategy & Structure,1962) :
The determination of the long-run goals of an
enterprise, and the adoption of courses of action
and the allocation of resources necessary for
carrying out these goals.
Igor Ansoff : Strategic Decisions are primarily
concerned with external rather than internal
problems of the firm and specifically with the
selection of the product mix the firm will produce
and the markets to which it will sell.
Kenneth Andrews (The concept of Corporate
Strategy, 1971): Strategy is the pattern of
objectives, purposes, or goals and the major
policies and plans for achieving these goals
 Henry Mintzberg : Strategy represents a
fundamental congruence between external
opportunities and internal capability.
Kenichi Ohmae ( The mind of the strategist,
1983): What business strategy is all about is, in
a word, competitive advantage The sole
purpose of strategic planning is to enable a
company to gain, as efficiently as possible, a
sustainable edge over its competitors. Corporate
strategy thus implies an attempt to alter a
companys strength relative to that of its
competitors in the most efficient way.
 Strategy is direction & scope of an
organization over the long term, which
achieves advantage for the organization
through its configuration of resources
within a changing environment & to fulfill
stake holders expectations.
ITC?
Challenges of globalization, hypercompetition,
ethics & Corporate Governance, e-commerce &
continuous learning organization
At the practical level, companies continue
to battle with the core dilemma of strategy
formulation: how can companies take
long-term decisions concerning new
products / services , new technologies,
and investments in physical assets and
human capital when their business
environments are changing at an ever
accelerating pace?
 Corporations must develop strategic flexibility
the ability to shift from one dominant strategy to
another.
Strategic flexibility demands a long term
commitment to the development and nurturing of
critical resources. It demands that companies
become a learning organization an
organization skilled at creating acquiring, and
transferring knowledge, and at modifying its
behavior to reflect new knowledge and
insights.
 Organizational learning is a critical component of
competitiveness in a dynamic environment , a
necessity for innovation & product
development.
Organizations that are willing to experiment, and
are able to learn from their experience are more
successful.
Companies competing to shape the future of
industry trying collaboration, sharing
competencies, risks and attempting for time
compression
 Hypercompetition occurs when the
frequency, boldness and aggressiveness of
dynamic movements by competitors accelerate
to create a condition of constant
disequilibrium and change
Competition in slower moving environment is
primarily building & sustaining competitive
advantage that are difficult to imitate
In hypercompetitive environments all advantages are
temporary & hyper competition disrupt the status quo so
that no one is able to sustain long term advantage on a
sustained basis
Terms often interchangeably used in
Strategic Management
Business Policy ( a cap-stone course)
Corporate strategy
Business strategy
Strategic Management
Strategic planning
Strategic Analysis
Strategic thinking
THE DIFFERENT ROLES OF STRATEGY
WITHIN THE FIRM

Strategy as Decision Support & actions

for long term
Strategy as a process for Coordinating
and communicating
Strategy as target
 The Basics of Strategic Management

1. Environmental
Scanning
2. Strategy
Formulation
Four Basic
Activities
of
4. Strategy
Strategic
Evaluation
Management 3. Strategy
Implementation
Strategic Management
Strategic Management is defined as the set of decisions
& actions resulting in formulation and implementation
of strategies designed to achieve the an organizations
objectives. It comprises of following critical tasks:

Formulating Mission of Company: including broad

statements about its purpose, philosophy, and goals
Assessment of External Environment
Developing Company Profile: analysis of internal
conditions organization, resources , capabilities,
Culture
Analyze possible options by matching Company
profile with external environment
Identify most desired options : by evaluating each
option in light of companys mission
 Strategic Management
Continued
Select a set of long-term Objectives & select Grand
strategies to achieve desired options; decide on
Generic strategy for each business/SBU
Develop Annual objectives & short term strategies
compatible with long term objectives and grand
strategies
Implement strategic choices by means of budgeted
resource allocation, with matching tasks, people ,
organization structures, technologies & reward system
Review and evaluate/ control for success of strategic
process and input for future decision making
(A strategy is a companys game plan, although it does not precisely detail all future
resource deployment, it does provide a framework for managerial decisions)
 STRATEGIC MANAGEMENT PROCESS MODEL

Company Mission
v ^
&Goals
External Environment Internal Analysis
Operating Possible ? (Company Profile)
<
Industry (Resources & Capa-
Remote bilities)
^ Desired ? ^

Strategic Analysis and Choices

Long-term Objectives Generic & Grand Strategies

Short term Objectives Functional / Operating Policies that empower

(Annual Plans/Budget) Strategies/ tactics action

Implementation of Strategy ( organizational structure;Leadership

Feed Back / culture,Programs, Budgets,responsibility & resource allocation)
Feed Back
Strategic Control (continuous improvement),
Innovation, & Entrepreneurship
 The Iterative flow of Strategic process

Change in one component may affect several other

components
The Strategic management process : often misconceived
as unidirectional flow of objectives, strategies, and
parameters from corporate to business to functional level
managers.
Highly interactive , designed to stimulate input from
creative, skilled and knowledgeable people at all levels
Team oriented
Participation enhances commitment
Feedback essential, Dynamic in nature in todays
environment
Dimensions / characteristics of Strategic Decisions
What decisions facing a business are strategic? -
deserving strategic management attention? Typically
strategic issues / decisions have following dimensions:
Strategic Management Integrates various functions.
Strategic decisions have multi-functonal or multi-business
consequences
Strategic Issues often affects Firms Long- term prosperity.
Strategic decisions cant be reverted on the fly
Oriented towards achieving organization-wide goals
Considers a broad range of stake holders
Strategic issues are future oriented, require considering firms
external environment & often entails multiple time horizons
Commit substantial resources & great deal of
commitment from people at all levels. Due to several of
the above mentioned reasons, decisions on Strategic
issues require top management participation &
approval..
.
 Complex in nature & have more uncertainty
Strategic decisions affect operational decision. Many
strategic decisions may call for changes in structures,
systems, policies, as well as values / cultures of the
organization.
Strategic decisions are not self generating ( routine), unlike
operational decisions, often have no precedents
They are concerned with both effectivity ( doing the right thing)
and efficiency ( doing the things right)
 Basics of strategy decisions & Strategic Management

Strategic Management
Big picture view of organization
Highly influenced by its external environment

Interdisciplinary
Aspects that
set apart External focus
Strategic Internal focus
Management
Future direction
Goal of Business : THE DISTINCTION BETWEEN CORPORATE &
BUSINESS STRATEGY

If we accept that the fundamental goal of the firm is to

earn a return on its capital that exceeds the cost of
that capital, what determines the ability of the firm to
earn such a rate of return?
There are two routes. First, the firm may locate in an
industry where favorable conditions result in the
industry earning a rate of return above the cost of capital
and average level of profitability amongst different
industries.
Second, the firm may attain a position of advantage vis-
-vis its competitors within an industry, allowing it to
earn a return in excess of the industry average .
These two sources of superior performance define the
two basic levels of strategy within an enterprise:
corporate strategy and business strategy.
 Corporate strategy defines the over all Purpose and
scope of the firm in terms of the industries and markets in
which it competes. Corporate strategy decisions include
investment in diversification, vertical integration,
acquisitions, and new ventures; the allocation of
resources between the different businesses of the firm;
and divestments.
Business strategy is concerned with how the firm
competes within a particular industry or market. If the firm
is to prosper within an industry, it must establish a
competitive advantage over its rivals. Hence, this area of
strategy is also referred to as competitive strategy.
 SBU ?

Part of an organization for which there is a

distinct market for goods & service that is
different from another SBU
Example Paints Business are there different
SBUs?
Possibly (i) SBU for Industrial Paint & (ii) SBU for
Retail/ Decorative Paint
Need to follow different Strategies for the above
two markets. They have different types of
customers, need different distribution channels etc
 The Three Levels of Strategy (strategic
decision making hierarchy of a firm)
Corporate Level - composed of Board of Directors,
CEO, top mgmt: (responsibility for firms over all financial
performance & achievement of non-financial goals, drive development of
major elements of strategic planning & management process, reviews ,
evaluate and counsel on all other aspect)
Business Level - composed of senior business and
corporate managers (Translate direction & intent generated at
corporate level into concrete objectives & strategies for individual
businesses and achieve the result. Responsible for environment analysis,
segmentation, forecast based on analysis, establishing business objectives
& developing business plans aided by inputs prepared by functional teams)
Functional Level ( Operational strategies)- composed of
functional areas, e.g.product and geographic managers Develop annual
objectives & short term strategies in areas like production, marketing,
operations, finance, R&D, HR etc. To support business achieve the
planned result.
Does Corporate add value? Role of centre?
 Corporate Level
Firms financial performance of as a whole &
non-financial goals like operating philosophies,
values, image , social responsibilities etc.
Determine firms lines of businesses in multi-
business firms
Set objectives that govern the activities of
individual businesses & functional areas
Exploit firms distinctive competencies across
multiple businesses. Develop synergies for
coordinating & sharing resources ( core competency
development, umbrella brand etc)
 Corporate Level

Some typical Corporate Level Strategic

decision
Choice of business
Source of long term financing option
Priorities for growth: M&A, Divestiture
Dividend policy
Development of R&D competence to be used
across all businesses
core competency development, umbrella branding etc
 Business Level
Translate corporate strategy into concrete
objectives and strategies for individual
businesses or SBUs
Strive to identify and secure most promising
market segment (s) within each business
portfolio. Concerned with selecting generic
strategies to create competitive advantages
Some typical business level decisions
Market segmentations and coverage
Selecting Distribution channels
New Product introduction
Plant or Warehouse relocations
An image changing communication & PR exercise
 Functional Level
Functional managers develop short range objectives &
strategies ( also called Operational strategies) , often
spanning one (or two years) in areas like production,
operations, R &D, finance, Marketing, IT, HR etc
However they have primary responsibility of
implementing and executing the firms strategic plans,
deliver efficiency & effectivity
Some examples
Level of inventory / customer service
Transportation mix
HR strategies for new recruits
General purpose vs specific purpose production tools
Debtors management approach
A focused TV ad campaign for specific purpose
 Characteristics of Strategic Management decisions at
different levels

Characteristics Corporate Business Functional

Type Conceptual/ value Mixed Operational
oriented
Measurability Value judgments Semi quantifiable Usually
dominated Quantifiable
Frequency Periodic or Periodic or Periodic
Sporadic Sporadic
Risk Wide ranging Moderate Low
Profit potential Large Medium Small
Cost Major Medium Modest
Time Horizon Long range Medium range Short range
Flexibility High Medium Low
Cooperation Considerable Moderate Limited within a
required smaller group
Hierarchy of Objectives & Strategic decision makers

Ends ( What Means

is to (How it is to Board of Corporate Business Functio
Be achieved ?) be directors managers managers nal
achieved?) manager
s
Mission, incl Primary Primary Secondary
goals &
philosophy
Long-term Grand Secondary Primary Primary
objectives Strategy

Annual Short-term Secondary Primary Primary

objectives strategy,
policies
Functional Tactics Secondary Primary
Objectives
 Strategic Management vs Operational
Management
An Individual manager most often deals with
problems of operational control, such as efficient
production of goods, management of sales
force, monitoring of financial performance or
design of new system to improve customer
service level.
These are vital to effective implementation of
Strategy but it is not the same a strategic
management.
The scope of strategic management is greater
than that of any one area of operational management
 Strategic Management Operational Management

Ambiguous / Uncertainty Routinised

Complex Operationally specific
Organization wide Limited to specific areas
Long-term implications Shorter-term implications

Strategic Management is concerned not only with taking

decisions about major issues facing the organization but
also concerned with ensuring that the strategy is put into
effect.
The vocabulary of Strategy**
Vision (or Strategic intent) : Desired future state
the aspiration of the organization
Mission: overriding purpose of the organization
Goals: General statement of aim or purpose in line
with the mission(may be qualitative in nature)
Objective: Quantification (as far as possible) or
precise statement of the goal
Unique resources and Core competencies :
Resources, processes or skills which provide
competitive advantage vis--vis competion
Strategies : Long term direction of the orgnztion
Control :Assess effectiveness or modify
strategies/actions based on latest information
 Different Approaches to Strategy
Debate between Design vs Process Schools
Design School of strategy views strategic
decision making a logical & planned process,
in which strategy is formulated through a rational
analysis of firm, its performance and the external
environment. The strategy is communicated to
the organization & implemented through
successive organizational layers
Process School of strategy , led by Henry
Mintzberg argues that strategy development is
more about crafting process than planning,
through involvement, intuition, experience,
learning, creativity & commitment of many within
the organization and their interaction with outside
world
Is Wal-marts rise due to grand planning or
crafting?

Wal-Marts brilliantly successful chain of

discount stores based on its unique distribution
system and small-town locations, was not the
result of grand design.
It was the result of Sam Waltons hunch that
discount stores could do well in small, rural
towns
Then finding that he needed to do his own
distribution because manufacturers and
wholesalers would not, he set up his own
distribution network
 Most text books on Strategic Management cover
rationalist, analytic approach to strategy
formulation in preference to the crafting
approach advocated by Mintzberg. This is not
because planning is necessarily superior to
crafting we have already noted that strategy is
about identity and direction rather than very
detailed planning. Nor is it because one wishes
to downplay the role of skill, dedication,
involvement, harmony, or creativity.
Studies by Henry Mintzberg and his colleagues
at McGill University into the process of strategy
making also distinguish between intended &
realized strategy
 Strategy development is a multidimensional process that
must involve both rational analysis and intuition,
experience, and emotion.
Without analysis, in the process of strategy formulation,
there will be no basis for comparing and evaluating
alternatives.
Moreover, critical decisions become susceptible to the
whims and preferences of individual managers, to
contemporary fads.
Concepts, theories, and analytic frameworks are not
alternatives or substitutes for experience, commitment,
and creativity.
But they do provide useful frames for organizing and
assessing the vast amount of information available on the
firm and its environment and for guiding decisions, and
may even act to stimulate rather than repress creativity
and innovation.
 Benefits of Strategic Management
Financial Benefits
Several studies provide convincing evidence
that firms adopting strategic management
approach return much improved performance,
outperforming non formal planners
Views on financial & non financial benefits are
shared by company executives
Benefits of Strategic Management
Behavioral effects
Enhance problem prevention capabilities of
the firm
Group interaction generates best available
alternatives , commitment to organizational
goals.
Heightens Employee motivation reduces gaps
& overlaps among activities
Reduces resistance to change, improves
ownership of actions during implementation
Risks of Strategic Management process

Time management vis--vis operational responsibilities

for individual managers
Objective analysis required for Strategic management
consumes time & effort. Some companies are
perpetually in planning mode & devote little time for
implementation. This is self defeating.
Strategic plans could erroneously be made too rigid &
inflexible. Large scale Forecasting errors can damage
the process
Expectation management of subordinates may become
issue if not handled properly
Strategic Analysis and Choice
Possible attractive opportunities: avenues for investment
Screened through the criterion of the company mission,
a set of possible and desired opportunities
Further screening results in selection of strategic choices
Process provides a combination of long term objectives,
and generic and grand strategies that optimally position
the firm in the environment to achieve the cos mission.
( Strategic Analysis & choice revolves around building sustainable
competitive advantage in case of a single or dominant business;
Multi-business firms focus for best combination of businesses to
maximize shareholder value)
Criteria used in assessing choices depends on attitude towards
risk, flexibility, growth, stability, profitability etc, firms current
commitment to organization structure, access to resources
Long Term Objectives
Results sought to be achieved over a number of
years
Objectives typically involve the following areas:
Profitability, ROI, Competitive positioning,
Technology Leadership, Productivity, public
relation, employee development etc
Objectives should be specific, measurable and
consistent with other objectives of the firm
Example: doubling of earning per share within 5
years, becoming number two in the decorative
Paints business by 2006 etc
Generic and Grand Strategies
Generic strategies : Firms explicitly or implicitly adopt
one or more generic or combination strategies that
characterizes their competitive orientation in the
market place Cost leadership, differentiation , focus
Grand strategies: unique package of long term
strategies to achieve companys objectives. The Grand
strategy provides the framework for the entire business
of the firm. 15 identified basic approaches of grand
strategies :
concentration, market development, product development, innovation,
horizontal integration, vertical integration, JVs, strategic alliances,
consortia, concentric diversification, conglomerate diversification,
turnaround, divestiture, bankruptcy and liquidation
Functional Strategies / tactics or operational
strategies / tactics
Short term , limited scope plans are called tactics
Grand strategy is split into strategy for each business
division and beneath that functional tactics
Specific to needs of each functional area and prescribe
an integrated action plan
Operating strategies provides means for achieving
annual objectives
Company budget is coordinated with the needs of
operating strategies to ensure specificity, practicality and
accountability in the plans
 Policies
Directives designed to guide thinking, decisions
and actions of managers & their subordinates in
strategy implementation
Policies empower decision making to the lower
levels in the organization
Policies / Standard Operating Procedures :
increase managerial effectiveness by
standardization in repetitive decision making,
limiting discretion & speeding up decision
making.
Strategy Implementation

Strategy implementation is the process by

which strategies and policies are put into
action through the development of
programs, budgets, and procedures,
sometimes termed standard operating
procedures (SOP).
 Institutionalizing the strategy
Annual objectives, functional strategies,
and policies are important means of
communication for implementing strategy
Translating long-term objectives into short
term goals make the strategy operational.
Strategy must permeate the vary day-to-
day activities of the company
Long term means of institutionalizing
through Structure, leadership and culture.
 Control and evaluation
Strategy formulation is largely subjective, and
the first test of reality for a strategy is in its
implementation.
Strategy managers should employ early
monitoring and control methods, to ensure that
the strategic plan is followed.
The ultimate test of strategy is its ability to
achieve the ends annual objectives, long term
objectives and the companys mission.
 Developing a strategic perspective
Developing a strategic perspective contributes to
effective implementation of strategy. Organizations often
fail to develop such perspective due to:
Lack of awareness within top management
Kidding themselves syndrome
Vested interest to maintain power & position
Excessive involvement in day to day operations
Top management complacent after initial success
Change of direction often misinterpreted as an
admission of past mistake, resist change
Solution is to make strategy development
process a FORMAL activity
Strategic Management Challenges in the new
millennium

Ethics & social Responsibility

Impact of Globalization
Technological changes , especially impact of Electronic
commerce
Information revolution
Hyper-competition
Creating a learning Organization transition from an
Industrial to knowledge based society
Diversity of Workforce
Competing through collaboration in networked economy
Complexity of Strategic Management environment
Strategy : Creating Value for Whom? Shareholder Vs
Stakeholder
Strategy is about creating Value by realizing superior
performance
The Value created by firms is distributed among
different parties or stakeholders. Value added is
distributed among Owners / shareholders (profit),
lenders ( interest), employees ( wages), government
(taxes), customers ( consumer surplus) & society at large
A key role of top management is to balance the interest
of different stake holders with (often conflicting) interests.
The case for the stakeholder approach to defining the
goals of the firm is based on the recognition that
business enterprise is a social institution pursuing the
interest of multiple groups.
 In Japan & continental Europe , the notion of
corporation balancing interests of multiple interest
groups has a long tradition ( reflected in companys legal
obligations)
In the US, Canada, the UK & Australia company
boards are required to act in the interests of share
holders, French boards are required to pursue the
national interest, Dutch boards are required to ensure
the continuity of the enterprise rather than shareholder
value, and German supervisory boards are constituted
to include representatives of both shareholders &
employees
Shareholder vs Stakeholder -On going debate
Raises issue of ethics & broader social
responsibility of business
 Under conditions of increasing competition, firms
have little alternative to pursuing profitability.
Pressure of competition has caused interest of different
stakeholders to converge. The underlying common
interest of all stakeholders is the firms survival.
Survival requires that, over the long term, the firm earns
a rate of profit that covers it cost of capital
Managers who do not serve the interest of shareholders
will be replaced by those who do. Pressure of active
international shareholders ( Pension funds, retirement
systems, large hedge funds etc)
Quest for profits over the long term is likely to require
that a company treats its employees well and develops
their full potential, acts fairly & honourably towards
suppliers & customers, and conduct itself responsibly in
relation to the environment & societys value. Good
ethics are good business
 One of the most compelling reasons for
assuming that firms exist to make profit is
simply that such a goal allows us to subject
strategic decision making to rational
analysis. Virtually all the major tools of
business decision making & arsenal of
management techniques are founded on
the notion that more profit is better than
less.
EVA
Balanced Score Card
Why need Vision, Mission & Values ?
Profit Maximization (shareholder value
maximization, to be precise) provides the
foundation for strategy analysis
Yet it is not the one that causes Bill Gates to
continue working at Microsoft rather than retiring
to enjoy his billions of dollar of personal wealth
Nor does it provide such motivation or direction
to the thousand of employees of his company
Vision, mission & values are the three concepts
that have become highly influential in helping
companies think about their identity, their
purpose and the fundamental features of their
strategy