Strategic Management

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 Core concept of Strategy:
• Competitive moves and business approaches that managers
employ to
– Attract and please customers,
– Compete successfully,
– Grow the business,
– Conduct operations and achieve targeted objectives.

• Military Origins of Strategy:

• Strategy is a term that comes from the Greek Strategia, meaning
"Generalship“.
• In the military, strategy refers to manoeuvring troops into position
before the enemy is actually engaged. In this sense, strategy refers
to the deployment of troops. Once the enemy has been engaged,
attention shifts to tactics.
• Substitute "resources" for troops and the transfer of the concept to
the business world
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 Strategy and Concept of Strategic Management
• Alfred D Chandler(1962) : “The determination of basic long-term goals
and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals”
• Kenneth Andrews(1965) : “The pattern of objectives, purpose, goals, and
the major policies and plans for achieving these goals stated in such a
way so as to define what business the company is in or is to be and the
kind of company it is or to be
• Igor Ansoff(1965) : “The common thread among the organisation’s
activities and product-markets…that defines the essential nature of
business that the organisation was or planned to be in future”
• William F Gleueck(1972) : “A unified, comprehensive and integrated plan
that relates the Strategic advantage of the firm to the challenges of the
environment and is designed to ensure that the basic objectives of the
enterprise are achieved through proper implementation process”
• Michael E Porter(1996) : “Creation of a unique and valued position
involving a different set of activities. The company that is strategically
positioned performs different activities from rivals or performs similar
activities in different ways”

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 Policies V/S Strategies
• Policy is guideline for • Strategies are concerned with
decisions & actions to be the direction in which human
taken by subordinates for the and physical resources are
fulfilment of the set of deployed to maximise the
objectives. chances of achieving
organisational objectives in
face of variable environment.

• Policies are commonly • Strategies are specific actions

accepted understanding of suggested to achieve
decision making. objectives.

• Policies are thought oriented. • Strategy is action oriented

and empowers concerned to
implement them.

• Policies have to be delegated • Strategy cannot be delegated

to be implemented downwards.
successfully and effectively.
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 Strategy v/s Tactics
• Strategy determines the major
plans to be undertaken.
• Goal of Strategy is to gain
competitive advantage, break the
opponent.
• Strategic decisions cannot be
delegated downwards.
• Strategy formulation is dynamic,
responding to environment. It can
be continuous or irregular.
• Strategy has a long term
perspective & have a high
element of uncertainty.
• Tactics is means by which
previously determined plans are
executed.
• Goal of Tactics is to achieve
success in a given action.
• Tactics decisions can be
delegated to all levels of
organisation.
• Tactics are determined on a
periodic basis with some fixed
timetable.
• Tactical decisions are more
certain as they work upon
framework set by Strategy.
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 Mintzberg’s 5Ps of strategy –
• Henry Mintzberg, in his 1994 book, The Rise and Fall of
Strategic Planning, points out that people use "Strategy"
in several different ways, the most common being these
five:
1. Strategy is a Plan, a "how," a means of getting from here
to there.
2. A strategy can be a Ploy too; really just a specific
manoeuvre intended to outwit an opponent or competitor.
3. Strategy is a Pattern in actions over time;
4. Strategy is Position; that is, it reflects decisions to offer
particular products or services in particular markets.
5. Strategy is Perspective, that is, vision and direction.

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• Thus, one might start with a perspective and conclude
that it calls for a certain position, which is to be
achieved by way of a carefully crafted plan, with the
eventual outcome and strategy reflected in a pattern
evident in decisions and actions over time.

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 Mintzberg’s 5Ps of strategy

1. Strategy is a PLAN
• Strategy is a plan - some sort of consciously intended
course of action, a guideline (or set of guidelines) to deal
with a situation.
• Strategies have two essential characteristics: they are
developed consciously and purposefully.
• A firm has to dominate a market for a particular service or
practice area.

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• 2. Strategy as a PLOY:
• A specific "manoeuvre" intended to outwit an opponent or
competitor.
• The real strategy (as plan, that is, the real intention) is the
threat,
• By plotting to disrupt, dissuade, discourage, or otherwise
influence competitors can be part of a strategy.
• For example, a grocery chain might threaten to expand a
store, so that a competitor doesn't move into the same area;
• A telecommunications company might buy up patents that a
competitor could potentially use to launch a rival product.
• Techniques and tools such as the Impact Analysis and
Scenario Analysis can help you explore the possible future
scenarios in which competition will occur.

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• 3. Strategy is a PATTERN:
• Strategic plans and ploys are both deliberate exercises.
Sometimes, however, strategy emerges from past
organizational behavior.
• A consistent and successful way of doing business can
develop into a strategy.
• for example, a company that regularly markets very
expensive products is using a "high end" strategy.
• Imagine a manager who makes decisions that further
enhance an already highly responsive customer support
process. Despite not deliberately choosing to build a
strategic advantage, his pattern of actions nevertheless
creates one.
• Tools such as USP Analysis and Core Competence
Analysis can help you with this.
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• 4. Strategy is a POSITION:
• "Position" is another way to define strategy - that is, how you
decide to position yourself in the marketplace.
• Strategy helps you explore the fit between your organization
and your environment, and it helps you develop a sustainable
competitive advantage
• For example, strategy might include developing a niche
product to avoid competition, or choosing to position yourself
amongst a variety of competitors, while looking for ways to
differentiate your services.
• To do this, use PEST Analysis, and Porter's Five Forces to
analyze your environment -

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• 5. Strategy is a PERSPECTIVE:
• The choices an organization makes about its strategy rely
heavily on its culture – just as patterns of behavior can
emerge as strategy, patterns of thinking will shape an
organization's perspective, and the things that it is able to do
well.
• For instance, an organization that encourages risk-taking and
innovation from employees might focus on coming up with
innovative products as the main thrust behind its strategy.

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• The Plan provides the roadmap by which the firm
intends to achieve its goals. Ploys add a dimension of
feint and manoeuvre, where one firm's gain is another's
loss and competitive advantage is critical. Pattern
emphasizes that strategy is not a once-off event but a
constant stream of decisions and resultant actions that
drive the firm forward, over time, towards its goal.
Position adds that different firms have different mixes of
markets, clients and services that they provide to those
clients. Finally Perspective provides an insight onto how
the firm and its strategists are informed by their own
professions, their perceptions of business, and the
unique characteristics of each firms own "world."
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 Strategic
Management
Process
 The Strategic Management Process

• Strategic management involves the major decisions, business

choices, and actions that chart the course of the entire
enterprise.
• It consists of:
– Analysis of the internal and external environment of the firm.
– Definition of the firm’s mission.
– Formulation and implementation of strategies to provide a
competitive advantage.
• Strategic management involves both long-range thinking and
adaptation to changing conditions.
• A strategy is successful if it provides the firm with sustainable
competitive advantage.
– Competitors will be unable to duplicate what the firm has
done or will find it too difficult or expensive.
Strategic Management Process

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 SWOT Analysis
Strengths Weaknesses
 Patents  Lack of patent protection

 Strong brand names  A weak brand name

 Good reputation among  Poor reputation among customers

customers
 Exclusive access to high grade
natural resources
 Favorable access to distribution
networks
 High cost structure
 Lack of access to the best natural
resources
 Lack of access to key distribution
channels
 SWOT Analysis

Opportunities Threats

 An unfulfilled customer  Shifts in consumer tastes

need away from the firm's

 Arrival of new products

technologies  Emergence of substitute

 Loosening of regulations products

 Removal of international  New regulations

trade barriers  Increased trade barriers

 Porter’s Five Forces
Threat of substitute
Potential new products
entrants Rivalry among competitors
Bargaining power of
buyers

Bargaining power of
suppliers
 External Environment -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
 PEST Analysis
Political Factors Economic Factors
 Tax policy
 Economic growth
 Employment laws
 Environmental regulations  Interest rates
 Trade restrictions and tariffs
 Exchange rates
 Political stability
 Inflation rate

Social Factors Technological Factors

 Health consciousness  R&D activity
 Population growth rate  Technology incentives
 Age distribution  Rate of technological change
 Career attitudes

 Emphasis on safety
 Strategy Formulation
• Formulation is the development of long-range plans for
the effective management of environmental opportunities
and threats, in light of corporate strengths and
weaknesses (SWOT).
• It includes defining the
– corporate mission,
– specifying achievable objectives,
– developing strategies, and
– setting policy guidelines.

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 Mission statement
• An organization’s mission statement is the purpose or
reason for the organization’s existence. It tells what the
company is providing to society.
• Mission Statement
– Purpose/reason for organization
– Promotes shared expectations
– Communicates public image
– Who we are; what we do; what we aspire to
• Nirma is a customer focused company to consistently
offer better quality products & services that maximize
value to the customer

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 Objectives
• Objectives are the end results of planned activity.
• What is to be accomplished by when and quantified if possible.
• The achievement of corporate objectives should result in the fulfillment of
corporation’s mission.
• Objective are action oriented
– Profitability (net profit)
– Efficiency (low costs.etc)
– Growth (increase in total assets, sales, etc)
– Resource utilization (ROE, ROI)
– Reputation(being considered a “top” firm
– Contributions to employees(employment security, wages, diversity)
– Contributions to society(tax paid, participation in charities)
– Market leadership (market share)
– Technological leadership(innovation)
– Survival (avoiding bankruptcy)
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 Strategy
• A strategy of a corporation forms a
comprehensive master plan that states
how the corporation will achieve its
mission and objectives. It maximizes
competitive advantage and minimizes
competitive disadvantage

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 Corporate-Level Strategies
•Vertical integration
•Diversification
•Strategic alliances
•Acquisitions
•New ventures
•Business portfolio
restructuring

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 Business-Level Strategies
Cost leadership
– Attaining the lowest total cost basis as a competitive
advantage.
Differentiation
– Using product features or services to distinguish the
firm’s offerings from its competitors. E.g Big Bazaar-
Value for money
Market niche focus
– Concentrating competitively on a specific market
segment.

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 Functional-Level Strategies
Focus is on improving the effectiveness of
operations within a company.
– Manufacturing
– Marketing/ P & G uses high adv for pull
– Materials management
– Research and development
– Human resources

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 Policy
• A policy is a broad guideline for decision making that links the
formulation of a strategy with its implementation. Companies use
policies to make sure that employees throughout the firm make
decisions and take actions that support the corporation’s mission,
objectives, and strategies
• 1. Policies include guidelines, rules, and procedures established
to support efforts to achieve stated objectives.
• 2. Policies are most often stated in terms of management,
marketing, finance/accounting, production/operations, research and
development, and computer information systems activities.
• Examples: smoking policy, recruitment policy
• 3M – researchers to spend 15% of time other than their primary
project for strong development strateggy
• Intel cannibalizes its own product
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 Strategy implementation
• Strategy implementation is a process by which strategies and
policies are put into action through the development of programs,
budgets, and procedures.
The process of putting strategies and policies into action through the
development of:
– Programs - statements of activities or steps needed to
accomplish a single-use plan.
– Budgets - statements of a corporation’s programs in Rs terms.
– Procedures - systems of sequential steps or techniques that
describe in detail how to perform particular tasks or jobs.

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 Program
• Boeing strategy to regain industry leadership with its
proposed 787 Dreamliner by
– Outsource 70% of manufacturng
– Reduce final assembly time to 3 days by having supplier
completed plane sections
• BMW to increase it’s produtin efficiency by 5% each year by
– Shorten new model development time from 60 to 30 days

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 Budgeting and procedures
• Budgeting: Is the process of allocating resources to be employed to
achieve objectives.
• Budget is a statement of a corporation’s activities in terms of Rs
Used in planning and control, a budget lists the detailed cost of each
program. Many corporations demand a certain percentage return on
investment, often called a “hurdle rate” before management will
approve a new program.
• Budget should be directly linked to strategy implementation.
• Procedures: Sometimes termed Standard Operating Procedures
(SOP), are a system of sequential steps or techniques that describe
in detail how a particular task or job is to be done. They typically
detail the various activities that must be carried out in order to
complete the corporation’s program.
• E.g Homedepot adopted restocking & pricing at night
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 Strategy control and evaluation
• Ensure that a company is achieving what it sets out to
accomplish.
• It compares performance with desired result and
provides the feed back necessary for management to
evaluate results and take corrective action, as needed.

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 Strategy Evaluation
The implementation of the strategy must be monitored and adjustments made as
needed.

Evaluation and control consists of the following steps:

 Define parameters to be measured

 Define target values for those parameters

 Perform measurements

 Compare measured results to the pre-defined standard

 Make necessary changes

Evaluation Criteria:

 Suitability

 Feasibility

 Acceptability
 Strategy Evaluation: Suitability
•Suitability deals with the overall rationale of the strategy. The key point to consider is
whether the strategy would address the key strategic issues underlined by the
organization's strategic position.

•Does it make economic sense?

•Would the organization obtain economies of scale, economies of scope or experience
economy?
•Would it be suitable in terms of environment and capabilities?
 Strategy Evaluation: Feasibility

Feasibility is concerned with the resources required to implement the

strategy are available, can be developed or obtained.

Resources include funding, people, time and information.

 Strategy Evaluation: Acceptability
Acceptability is concerned with the expectations of the identified
stakeholders (mainly shareholders, employees and customers) with the
expected performance outcomes.

Return deals with the benefits expected by the stakeholders (financial and
non-financial).
Risk deals with the probability and consequences of failure of a strategy
(financial and non-financial).
Stakeholder reactions deals with anticipating the likely reaction of
stakeholders.