UNIT I Corporate Strategic

Management
 What is Strategy?
Characteristics of Strategy
What is Strategic Management?
Evolution of Strategic Management
Process of Strategic Management
Mission - Vision of the firm
Levels of Strategy- corporate-level, business-
level and functional-level
 What is strategy?
Strategy is a tactical course of action which is designed to
achieve long term objectives. It is an art and science of
planning and marshalling resources for their most efficient
and effective use in a changing environment.

Strategy of a business enterprise consists of what

management decides about the future direction and scope
of the business. It entails managerial choice among
alternative action programmes, competitive moves and
different business approaches to achieve enterprise
objectives.

Strategy once formulated has long term implications. It is

framed by top management in an organization. In short, it
may be called as the game plan of management.
 Main Questions
Where is organization now?
If no changes are made, where will
the organization be in 1,2,5 years?
If the answers are not acceptable,
what specific actions should
management undertake?
What are risks and payoffs
involved?
 Definition of strategy
According to Norman
(1993), Strategy is the art of
creating Value.
According to Porter
(1996), Strategy is about
being different. It
means deliberately
choosing a different set
of activities to deliver a
unique mix of value.
 Definition of Strategy
As per Glueck,
Strategy is unified, comprehensive and integrated plan
relating the strategic advantages of the firm to the
challenges of the environment. It is designed to ensure
that the basic objectives of the enterprise are achieved.

As per Alfred D. Chandler,

Strategy is The determination of basic long-term goals and
objectives of an enterprise and the adoption of the
courses of action and the allocation of resources
necessary for carrying out these goals.
 Characteristics of strategy
The decision is concerned with
or effects the long term
direction of an organization.
Strategic decisions are normally
about trying to achieve some
advantage for the organization.
Decision is likely to be
concerned about the scope of
an orgaizatios activities.
Decisions can be seen as
matching of the activities of an
organization to the
environment in which it
operates.
 Characteristics of strategy
Decisions have major
financial or other
resource implications.
Decision will have a
major impact outside
the organization.
Strategic decisions are
likely to affect operations
decisions.
Decisions entail significant
risks to the business.
 5 Ps of strategy
Professor Henry Mintzberg
of McGill University in
Montreal, Canada,
articulated what he labeled
as the 5 Ps of strategy.
According to Mintzberg,
understanding how strategy
can be viewed as a plan, as
a ploy, as a position, as
a pattern, and as
a perspective is important.
 Strategic Management
Strategic management is a set of
management decisions and actions that
determines the long-run performance of a
corporation. It includes environmental
scanning, strategy formulation, strategy
implementation and evaluation and control
to achieve the objectives of an organization.

The study of strategic management

emphasizes the monitoring and evaluating of
external opportunities and threats in light of
a corporations strengths and weaknesses.
 As per Fred R. David, strategic management is
an art and science of formulating,
implementing and evaluating cross functional
decisions that enable an organization to achieve
its objectives.

As per Channon, strategic management is

defined as that set of decisions and actions that
result in formulating of strategy an its
implementation to achieve the objectives of
the corporation.
In Simple Strategic Management
is..
Process of formulating,
implementing, and evaluating,
strategies to accomplish long-term
goals and sustain competitive
advantage.
 It Is a process!!!
Strategic management is
a process that involves
building a careful
understanding of how the
world is changing, as well
as knowledge of how
those changes might
affect a particular firm.
 SIGNIFICANCE/ IMPORTANCE OF STRATEGIC
MANAGEMENT

Strategic management takes into account the

future and anticipates for it.
A strategy is made on rational and logical
manner, thus its efficiency and its success are
ensured.
Strategic management reduces frustration
because it has been planned in such a way that
it follows a procedure.
 It brings growth in the organization because it seeks
opportunities.

Strategic management also adds to the reputation of

the organization because of consistency that results
from organizations success.

Often companies draw to a close because of lack of

proper strategy to run it. With strategic management
companies can foresee theevents in future and thats
why they can remain stable in the market.
 Strategic management looks at the threats present in
the external environment and thus companies can
either work to get rid of them or else neutralizes the
threats in such a way that they become an
opportunity for their success.

Strategic management focuses on proactive approach

which enables organization to grasp every opportunity
that is available in the market.
Benefits of Strategic Management

Clear sense of strategic vision of the

firm

Sharper focus on what is strategically

important

Improved understanding of a rapidly

changing environment
Strategic Management

The Evolution
 Some Questions

How has the strategy field developed?

How has the thinking in strategy evolved?
How is the thinking in strategy moving towards?
What are the questions in strategy that are not
answered?
What are the dilemmas and confusions in the field of
strategy
What have been the loop holes in strategy making?
What are the potential models of sustainable strategy?
 The Evolution in SM thinking

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
- Lamb 1984
 Process
Strategy formulation

Performing a situation analysis, self-evaluation and competitor analysis: both

internal and external; both micro-environmental and macro-environmental.

Concurrent with this assessment, objectives are set. These objectives should be
parallel to a timeline; some are in the short-term and others on the long-term.
This involves crafting vision statements (long term view of a possible future),
mission statements (the role that the organization gives itself in society),
overall corporate objectives (both financial and strategic), strategic business
unit objectives (both financial and strategic), and tactical objectives.

These objectives should, in the light of the situation analysis, suggest a

strategic plan. The plan provides the details of how to achieve these objectives.
 Strategy implementation
Allocation and management of sufficient resources
(financial, personnel, time, technology support)

Establishing a chain of command

(such as cross functional teams)

Assigning responsibility
of specific tasks or processes to specific individuals or groups

Managing the process

This includes monitoring results, comparing to benchmarks and best practices,
evaluating the efficacy and efficiency of the process, controlling for variances, and
making adjustments to the process as necessary.

Acquiring the requisite resources,

developing the process, training, process testing, documentation, and integration with
(and/or conversion from) legacy processes.
 Strategy evaluation

Measuring the effectiveness of the organizational strategy. It's extremely

important to conduct a SWOT Analysis to figure out the strengths, weaknesses,
opportunities and threats

In corporate strategy, Johnson and Scholes present a model in which strategic

options are evaluated against three key success criteria:

Suitability (would it work?)

Feasibility (can it be made to work?)

Acceptability (will they work it?)

 EVOLUTION OF STRATEGIC
1950s MANAGEMENT
1960s-early 70s Mid-70s-mid-80s Late 80s 1990s 2000s

DOMINANT Budgetary Corporate Positioning Competitive Strategic

THEME planning & planning advantage innovation
control

MAIN Financial Planning Selecting Focusing on Reconciling

ISSUES control growth &- sectors/markets. sources of size with
diversification Positioning for competitive flexibility &
leadership advantage agility

KEY Capital Forecasting. Industry analysis Resources & Cooperative

CONCEPTS budgeting. Corporate Segmentation capabilities. strategy.
& Financial planning. Experience curve Shareholder Complexity.
TOOLS planning Synergy Portfolio analysis value. Owning
E-commerce. standards.
Knowledge Management

MANAGE-
Coordination Corporate Diversification. Restructuring. Alliances &
MENT & control by planning depts. Global strategies. Reengineering. networks
IMPLIC- Budgeting created. Rise of Matrix structures Refocusing. Self-organiz
ATIONS systems corporate Outsourcing. ation & virtual
planning organization
 Criticisms of strategic
management
marketing myopia

In 2000, Gary Hamel coined the term strategic

convergence

Ram Charan, aligning with a popular marketing tagline,

believes that strategic planning must not dominate
action. "Just do it!",
 Strategic Framework
Vision, mission, objectives and goals
 Vision - Definition

Vision statement answers

the question: What will
success look like?
 Characteristics of vision

A basis of performance.

Reflects core values.

Way to communicate.
 Benefits of having a vision

Good visions are inspiring and exhilarating.

Good vision foster long term thinking.
Good vision foster risk-taking and experimentation.
Good vision help in the creation of a common identity
and a shared sense of purpose.
Good visions are competitive, original and unique.
Good visions represent integrity, they are truly
genuine and can be used for the benefit of people.
 Examples of vision statement

Hindustan Lever Ltd

Our vision is to meet
the everyday needs of
people everywhere.
 Mission - Definition
Mission statement is a
statement of purpose and
function.
It answersthefollowing
questions.
Why the organization does
exist?
What is its value addition?
What is its function?
How does it want to be
positioned in the market and
minds of customer?
What business is it in?
Mission
Organizations relate their existence to satisfying
a particular need of the society. They do it in
terms of their mission.

Mission is a statement which defines the

role that an organization plays in a society.

It refers to the particular need of that society for

instance, its information needs.
Formulating mission

1. What is the basic purpose of your organization?

2.What is unique about your organization?
3.What is in your company that will make it stand
out in a crowd?
4.Whoare, and who should be, your principal
customers?
5.What are the basicbeliefs, values and philosophical
priorities of your firm?
 Characteristics of mission
It draws on the belief
systems.
It must be future oriented
and portray your
organization as it will
be, as if it already exists
It must focus on one
common purpose.
It must be specific to the
organization, not generic.
Characteristics
1. Feasible
2. Precise
3. Clear
4. Motivating
5. Distinctive
6. Indicates major components of strategy
 Example of Mission Statement
Ranbaxy Laboratories

Ltd Our mission is to

become a research
based international
pharmaceutical
company.
Objectives - Definition

Objectives represent a managerial commitment to

achieve specified results in a specified period,
of time. They clearly spell out the quantity and
quality of performance to be achieved, the time
period, the process and the person who is
responsible for the achievement of the objective.
Objectives are end results of
planned activity

Objectives state what is to

be accomplished by when and
should be quantified if possible.
Example Objectives

Minnesota Mining & Manufacturing

(3M)

Financial objectives
1.To achieve 10% growth in
earnings per share.
2.To achieve 20% - 25%
return on equity.
3.To achieve 27% return on
capital
employed.
Characteristics
1. Objectives form a hierarchy
2. Objectives form a network
3. Multiplicity of objectives
4. Long and short range objectives
Areas of objectives
1.Markets
2.Productivity
3.Innovation
4.Product
5.Profitability
6.Financial resources
7.Physical facilities
8.Organization structure and activities
9.Manager performance and
development
10.Employee performance and attitude
11.Customer service
12.Social responsibility
Importance of objectives
1. Objectives help to define the organization in its
environment
2. Objectives help in coordinating decisions and
decision-maker
3. Objectives help in formulating strategies

4. Objectives provide standards for assessing

organizational performance
 Strategic Goals

Strategic goals address

the key question Where

do we wish to arrive

and Why?
SMART Goals
Goals are short term (one year or less)
milestones or bench marks that organizations must
achieve in order for long term long term
objectives to be reached.

Goals should be measurable, quantitative,

challenging, realistic, consistent and prioritized.
A set of goals is needed for each
objective that is established in an
organization.
 Nikes strategic goals
Protect Nikes position as
the number one athletic
brand in America.
Build a strong
momentum in the
growing fitness market.
Intensify the copays
efforts to develop
products that women
need and want.
 Step 1: Strategic Intent
Vision- Vision is the statement that expresses organizations
ultimate long-run objectives. It is what the firm ultimately like to
become. Vision once formulated is for forever and long lasting for
years to come. Vision is closely related with strategic intent and is a
forward thinking process. Eg- Microsoft- A computer software on
every desk and in every home.
Mission- It tells who we are and what we do as well as what wed
like to become. Mission of a business is the fundamental, unique
purpose that sets it apart from other firms of its kind and identifies
the scope of its operations in product and market terms. Eg-
Microsoft- Empower every person and every organization on the
planet to achieve more.
Objectives- These are the end results of planned activity that state
what is to be accomplished by when and should be quantified if
possible and their achievement should result in the fulfillment of a
corporations mission. Objectives state specifically how the goals
shall be achieved. Following are the areas for setting objectives-
profit objective, marketing objective, production objective, etc.
 Strategy Formulation
Strategy formulation refers to the process of choosing the most
appropriate course of action for the realization of organizational goals
and objectives and thereby achieving the organizational vision. For
choosing most appropriate course of action, appraisal of organization
and environmental is done with the help of SWOT analysis.
Environmental Appraisal- The environment of any organization is
"the aggregate of all conditions, events and influences that surround
and affect it". It is dynamic and consists of External & Internal
Environment . The external environment includes all the factors
outside the organization which provide opportunities or pose threats
to the organization. The internal environment refers to all the factors
within an organization which impart strengths or cause weaknesses of
a strategic nature.
Organizational Appraisal- It is the process of observing an
organizational internal environment to identify the strengths and
weaknesses that may influence the organization's ability to achieve
goals. The analysis of corporate capabilities and weaknesses becomes
a pre-requisite for successful formulation and reformulation of
corporate strategies. This analysis can be done at various levels:
functional, divisional and corporate.
 Strategy Implementation
Strategy implementation is the action stage of strategic management.
It refers to decisions that are made to install new strategy or reinforce
existing strategy.
Designing structure, process & system- Strategy implementation
includes the making of decisions with regard to organizational
structure, developing budgets, programs and procedures in order to
accomplish certain activities.
Functional Implementation- Functional implementation is carried
out through functional plan and policies in
five different areas- marketing, finance, operation, personnel and
Information management.
Behavioral Implementation- It denotes mobilizing employees and
managers to put and formulate strategies into action and require
personal discipline, commitment and sacrifice. It depends upon
managers ability to motivate employees.
Operationalizing strategy- It includes establishing annual objectives,
devising policies, and allocating resources.
 Strategy Evaluation & Control
Strategy evaluation- It is the primary means to know when
and why particular strategies are not working well. It is the
process in which corporate activities and performance
results are monitored so that actual performance can be
compared with desired performance. Thus strategic
evaluation activities include reviewing external and internal
factors that are the basis for current strategies.
Strategic control- In this step, organizations Determine
what to control i.e., which objectives the organization
hopes to accomplish, set control standards, measure
performance, Compare the actual with the standard,
determine the reasons for the deviations and finally taking
corrective actions and review the policies and activities if
needed.
Hierarchal levels of Strategic planning
 Corporate-level Strategy
At this level, strategic decisions relate to organization-wide policies and are taken
care by top-level management (BOD) with a vision of determining Where
the company wants to be?
It has two main aspects- Formulation of Strategy (strategic planning) and Strategy
Implementation
The nature of strategy at this level tend to be value-oriented, conceptual and than
other levels.
There is also greater risk, cost and profit potential as well as greater need of
flexibility associated with this level.
Major financial policy decisions involving acquisition, diversification and structural
redesigning belong to this level.
 Business-Level Strategy
Business-level strategy is more likely related to a unit
within the whole. It is concerned with competition in a
market.
The concerns are about what products or services should
be developed and offered to which markets in order to
meet customer needs and organizational objectives.
At this level, multifunctional strategies developed at
corporate level are formulated and implemented for
specific product market in which the business operates.
Thus, managers at this level translate general directions
and intent into concrete functional objectives.
Decisions at this level include policies involving new
product development, marketing mix, research &
development, personnel, etc.
Functional/Operational-Level Strategy
Functional strategy involves decision-making with respect
to specific functional areas- production, marketing,
personnel, finance etc.
While corporate and business level strategies are
concerned with Doing the right things, functional
strategies stress on Doing things right.
Operating level strategy is concerned with strategic
approaches for managing frontline operating units(like
plants, sales, etc) and for handling day to day tasks of
strategic significance(like advertising campaign,
purchasing materials, inventory control, maintenance,
etc.). Thus, it focuses on how the different functions of the
enterprise contribute to the other levels of strategy.
Thus, functional level strategic management is the
management of relatively narrow areas of activity, which
are of vital, pervasive or continuing importance to the total
organization.