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 STRATEGIC MANAGEMENT: HISTORY &
BACKGROUND
Strategic management as a discipline originated in the 1950s and 60s.

=     recognized the importance of coordinating the various aspects

of management under one allencompassing strategy.

= Stressed the importance of taking a long term perspective when looking to the
future.

= Longterm coordinated strategy was necessary to give a company structure,

direction, and focus. Concisely, ³structure follows strategy¶.

= In 1957, £  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 analysis
Strengths and weaknesses of the firm are assessed in light of the opportunities and
threats from the business environment.
 STRATEGIC MANAGEMENT: HISTORY &
BACKGROUND
In 1985,   

= Involves adapting the organization to its business environment.

= Fluid and complex. Change creates novel combinations of circumstances requiring
unstructured nonrepetitive responses.

= Affects the entire organization by providing direction.

= Involves both strategy formation (content) and also strategy implementation

(process).

= Partially planned and partially unplanned.

= Done at several levels: overall corporate strategy, and individual business strategies.

= Both conceptual and analytical thought processes.

 STRATEGIC MANAGEMENT: CONCEPT

= Ongoing process , evaluates and

controls 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.

= Reassesses each strategy regularly.

 STRATEGY: MISSION AND OBJECTIVES

= Describes the company's business vision: unchanging

values and purpose of the firm, forwardlooking
visionary goals that guide the pursuit of future
opportunities.
= Define measurable financial and strategic objectives:
Financial objectives involve measures such as sales
targets and earnings growth.
Strategic objectives are related to the firm's business
position, and may include measures such as market share
and reputation.
 STRATEGIC MANAGEMENT PROCESS:
ENVIRONMENTAL SCAN
The environmental scan includes the following components:

= Internal analysis of the firm

 

= Analysis of the firm's industry

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= External macroenvironment

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 STRATEGIC MANAGEMENT: MODEL

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 STRATEGIC MANAGEMENT: SWOT
ANALYSIS
= A scan of the internal and external environment is an
important part of the strategic planning process.

= Environmental factors internal to the firm usually can

be classified as strengths ( ) or weaknesses (), and
those external to the firm can be classified as
opportunities () or threats ().

= The SWOT analysis provides information that is

helpful in matching the firm's resources and
capabilities to the competitive environment in which
it operates
 STRATEGIC MANAGEMENT: SWOT
ANALYSIS
! 
= Patents = Lack of patent protection

= Strong brand names = A weak brand name

= Good reputation among customers = Poor reputation among customers

= Cost advantages from proprietary know = High cost structure

how = Lack of access to the best natural resources
= Exclusive access to high grade natural = Lack of access to key distribution channels
resources

= Favorable access to distribution networks

In some cases, a weakness may be the flip side of a strength.

 STRATEGIC MANAGEMENT: SWOT
ANALYSIS
 " 

= An unfulfilled customer need = Shifts in consumer tastes away from

the firm's products
= Arrival of new technologies
= Emergence of substitute products
= Loosening of regulations
= New regulations
= Removal of international trade barriers
= Increased trade barriers
STRATEGIC MANAGEMENT: SWOT MATRIX
To develop strategies that take into account the SWOT
profile, a matrix of these factors can be constructed.

=  ! pursue opportunities that are a good fit to

the company's strengths.

=  ! overcome weaknesses to pursue

opportunities.

=  ! identify ways that the firm can use its

strengths to reduce its vulnerability to external threats.

=  ! establish a defensive plan to prevent the

firm's weaknesses from making it highly susceptible to
external threats.
STRATEGIC MANAGEMENT: PORTER¶S FIVE
FORCES
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 STRATEGIC MANAGEMENT: PEST
ANALYSIS
A scan of the external macroenvironment in
which the firm operates can be expressed
in terms of the following factors:

= £olitical

= conomic

= ocial

= echnological
 STRATEGIC MANAGEMENT: PEST ANALYSIS
£    
 
= Tax policy
= Economic growth
= Employment laws
= Interest rates
= Environmental regulations
= Exchange rates
= Trade restrictions and tariffs
= Political stability = Inflation rate

    ! 

= Health consciousness = R&D activity

= Population growth rate = Automation

= Technology incentives
= Age distribution
= Rate of technological change
= Career attitudes

= Emphasis on safety
 STRATEGY FORMULATION

ü Strategy formulation is vital to the well

being of a company or organization.

= A leadership skill

= A process that leaders use to focus for

positioning the firm

= Iterative

= Assess, decide, act, and review

= Leaders determine how much to stretch

= How to create the benefits for customers

 STRATEGY FORMULATION: HIERARCHICAL
LEVELS

Strategy can be formulated on three different levels:

ü    # Company's overall direction in terms of its general attitude

towards growth and management of its various business and product lines.
ë Directional strategy

ë Portfolio analysis

ë Parenting strategy

ü ›" "  # It usually occurs at the business unit or product level and it
emphasizes improvement of the competitive position of a corporation's products or
services in the specific industry or marketing segment served by that business unit.
 CONTINUED..

ü "   
  

= It is the approach taken by a functional

area to achieve corporate and

= business unit objectives and strategies

by maximizing resource productivity.
 STRATEGY IMPLEMENTATION: SIX
SUPPORTING FACTORS

1. Action Planning

2. Organization Structure

3. Human Resources

4. The Annual Business Plan

5. Monitoring and Control

6. Linkage.
 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

 "  :

= 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?

Tools that can be used to evaluate suitability include:

=! !  
=$  
= 
 STRATEGY EVALUATION: FEASIBILITY

Feasibility is concerned with the resources required to implement the strategy are
available, can be developed or obtained.

Resources include "!% %
 
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Tools that can be used to evaluate feasibility include:

= › 

=  " 


=    !

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

" deals with the benefits expected by the stakeholders (financial and nonfinancial).

 deals with the probability and consequences of failure of a strategy (financial and non
financial).

   deals with anticipating the likely reaction of stakeholders.

Tools that can be used to evaluate acceptability include:

= 
= 
!
 STRATEGIC MANAGEMENT: GENERAL
APPROACHES
In general terms, there are two main approaches, which are opposite but complement each other in
some ways, to strategic management:

ü m"!  

ë Based on economic theory ² deals with issues like competitive rivalry, resource allocation,
economies of scale
ë Assumptions ² rationality, self disciplined behavior, profit maximization

ü    ! 

ë Deals primarily with human interactions
ë Assumptions ² bounded rationality, satisfying behavior, profit suboptimality. An example
of a company that currently operates this way is Google

ü Strategic management techniques can be viewed as bottomup, topdown, or collaborative

processes.
 STRATEGIC MANAGEMENT:
LIMITATIONS

= Stifle creativity, especially if it is rigidly enforced.

= When a strategy becomes internalized into a corporate culture, it can lead to group think.

= Can cause an organization to define itself too narrowly.

In 2000, Gary Hamel coined the term !  ! X

= Explain the limited scope of the strategies being used by rivals in greatly differing circumstances.

= Strategies converge more than they should, because the more successful ones are imitated by firms that do
not understand that the strategic process involves designing a custom strategy for the specifics of each
situation.
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1) Brand Image
2)Govt. Guarantee
3)Claims settlement
4)Large product portfolio
1) Lethargic Staff
2) Mediocre Top Bosses
3) Large scale Corruption in
Main Office
4) UltraSlow decision making
process
5) Internal problems between
Top Management and lower
cadre Employees
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1) Pension Market
2) Health Insurance
3) Large Real Estate portfolio

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1) Internal discord
2) New players
3) Red tapism
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= Increased service tax on premium

= discount on corporate premium

= Hike in FDI limit

= Pricing control in general insurance

= Favorable regulation for rural insurance

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= Increase in Gross Domestic Savings

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= Low insurance coverage

= Rise in elderly population

= Changing Indian perception

= Increase in lifestyle diseases

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= Automation of processes

= Increase in CRM solutions

= Internet driven information era

= Business Process Monitoring (BPM)

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1)Improvement in Product and Service Offerings

2)Use of information technology

= servicing large numbers of customers efficiently

= cutting down overheads

= To complement or supplement distribution channels cost

effectively

= Improve customer service levels considerably

= Understanding Customer needs

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