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Amity Business School

Business Environment &


Strategic Management
Module 1
Introduction
Evolution and introduction of strategic management; strategic
management process, impact of business environment on
strategic choices, classification and levels of strategy;
purpose of strategy formulation: concept of vision and
mission.

Ramesh Bagla

Amity Business School

Strategy
Strategy is a plan of action, which is of vital, pervasive
and continuing importance to an organisation as a
whole.
A strategy is a unified, comprehensive and integrated
plan that relates the strategic advantages of the firm to
the challenges of environment. It is designed to ensure
that the basic objectives of the enterprise are achieved
through proper execution by the organisation.
- Glueck & Jausch

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Strategy
Strategy is the direction and scope of an
organisation over the long term which
achieves advantage for the organisation
through its configuration of resources
within a challenging environment, to meet
the needs of markets and to fulfill
stakeholder expectations.
- Johnson & Scholes

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Strategy
The term strategy has its origin in the Greek word
Strategos which means the art of war as a noun and
to command an army as a verb.
The battleship concept of strategy refers to:
Future oriented preparation & readiness
A winning mindset motivated to seize every opportunity for
expansion/growth
Deterrence capability that prevents loss to rivals
Developing special expertise in areas where rivals are weak
Looking beyond the specific set of objectives, deadlines,
activities, functions, markets and organizational units, to
develop an overall picture of time and space

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A strategy is oriented towards:

What is our business?


What should it be?
What are our products and markets?
What can our firm do to accomplish objectives?
How do we leverage the advantages offered by the
environmental parameters?
How do we stay clear of the threats posed by the
external environment?

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Purpose of Strategy
Strategies focus on:

Organisational goals
Core competencies
Developing synergy
Creating value for customers
Competitive advantage

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Strategic Management
Strategic management is that set of
managerial decisions and actions that
determines the long run performance of a
corporation. It includes environmental
scanning(both internal & external),strategy
formulation(strategic planning), strategy
implementation and evaluation and control.

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Strategic Management

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Strategy vs. Strategic Management


Strategy is a series of goal-directed decisions
and actions matching an organizations skills
and resources with the opportunities and threats
in its environment
Strategic management Analyzes current
situation, Develops appropriate strategies, Puts
strategies into action, Evaluates, modifies, or
changes strategy

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EVOLUTION OF STRATEGIC MANAGEMENT


DOMINANT
THEME

MAIN
ISSUES

KEY
CONCEPTS
&
TOOLS

MANAGEMENT
IMPLICATIONS

1950s

1960s-early 70s

Mid-70s-mid-80s

Late 80s 1990s

2000s

Budgetary
planning &
control

Corporate
planning

Positioning

Competitive
advantage

Strategic
innovation

Financial
control

Planning
growth &diversification

Selecting
sectors/markets.
Positioning for
leadership

Focusing on
sources of
competitive
advantage

Reconciling
size with
flexibility &
agility

Capital
budgeting.
Financial
planning

Forecasting.
Corporate
planning.
Synergy

Industry analysis
Segmentation
Experience curve
Portfolio analysis

Resources &
Cooperative
capabilities.
strategy.
Shareholder
Complexity.
value.
Owning
E-commerce.
standards.
Knowledge Management

Coordination
& control by
Budgeting
systems

Corporate
planning depts.
created. Rise of
corporate
planning

Diversification.
Restructuring.
Global strategies. Reengineering.
Matrix structures Refocusing.
Outsourcing.

Alliances &
networks
Self-organiz
ation & virtual
organization

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Business Environment

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Business Environment

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Levels of Strategy in Organizations


Corporate-Level Strategy:
What business are we in?

Corporation

Business-Level Strategy:
How do we compete?
Textiles

Cement

Telecom

Functional-Level Strategy:
How do we support the business-level
strategy?
Finance

R&D

Manufacturing

Marketing
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Levels of Strategy and


Management Hierarchy
Corporate level: Board of directors,
CEO & administration [Highest]
Business level: Business and
corporate managers [Middle]
Functional level: Product, geographic,
and functional area managers [Lowest]

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Corporate Level Strategy


What businesses are we in? What
businesses should we be in?
Four areas of focus
Diversification management (acquisitions
and divestitures)
Synergy between units
Investment priorities
Business level strategy approval (but not
crafting)

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Corporate Level Strategy

Domain Definition: Where to Compete?


Defines Scope of Firm
In Which Industries Will We Compete?
Must Be Reflected in Mission
Choice of businesses, entry
(diversification) and exit (divestiture)
decisions, resource allocation/ priorities for
growth
Corporate Financial: Dividend Policies,
Sources of Long-term Financing

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Corporate Level Strategies


Grand Strategy
General plan of major action to achieve
long-term goals
Falls into three general categories
1. Growth
2. Stability
3. Retrenchment

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Business Level Strategy


How do we support the corporate strategy?
How do we compete in a specific business
arena?
Three types of business level strategies:
Low cost producer
Differentiator
Focus

Four areas of focus

Generate sustainable competitive advantages


Develop and nurture (potentially) valuable capabilities
Respond to environmental changes
Approval of functional level strategies

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Business Level Strategy


Domain Navigation: How to Compete?
Competitive Strategy
Help bridge decisions at the corporate
and functional levels
Less costly, risky, and potentially
profitable than corporate-level decisions
More costly, risky, and potentially
profitable than functional-level decisions
Include decisions on plant location,
marketing segmentation, and distribution

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Functional / Operational Level Strategy


Functional: How do
we support the
business level
strategy?
Operational: How do
we support the
functional level
strategy?

An example.
Business Level Stgy
Become the low cost
producer
Functional Level Stgy
(Mfg.): Reduce
manufacturing costs
by 10%
Operational (Plant #1):
Increase worker
productivity by 15%

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Functional/Operational Level Strategy


Implement the overall strategy formulated
at the corporate and business levels
Involve specific action-oriented and
operational issues
Relatively short range (typically within the
coming year) and low risk
Modest costs: depend upon available
resources
Relatively concrete and quantifiable

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Identifying the Strategic Issues


How to stave off market challenges from new foreign
competitors?
How to combat price discounting of rivals?
How to reduce a companys high costs?
How to sustain a companys present growth
in light of slowing buyer demand?
Whether to expand a companys product line?
Whether to acquire a rival firm?
Whether to expand into foreign markets rapidly or
cautiously?
What to do about aging demographics of a companys
customer base?

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Vision
Broad category of long-term intentions that
the organisation wishes to pursue
It is broad all inclusive and futuristic
A dream how the organisation sees itself
in future
It clearly and crisply illuminates the
direction in which the organisaion is
headed
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Vision
Vision statements specify the intentions
that are:
Broad, all inclusive, forward thinking
Aspirations for future - ends rather than
the means
Mental image of the future state
A dream that is shared across the entire
organisaion
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Essentials of good Business Vision


Statement
Should significantly stretch the resources and
capabilities of the firm
Should inspire people in the organization to
achieve things they never thought possible
Should unite people in the organization
toward the pursuit of one common goal

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Some Vision Statements


McDonalds
To give each customer, every time, an experience
that sets new standards in value, service,
friendliness, and quality.

NASDAQ
To build the worlds first truly global securities
market . . . A worldwide market of markets built on
a worldwide network of networks . . . linking pools
of liquidity and connecting investors from all over
the world . . . assuring the best possible price for
securities at the lowest possible cost.
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Some Vision Statements


Petsmart
To be the premier organization in nurturing
and enriching the bond between people
and animals.
Wachovia
Wachovias vision is to be the best, most
trusted and admired financial services
company.
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Some Vision Statements


AVB Group
To be a premium global conglomerate
with a clear focus on each business

ITC
Sustain ITC's position as one of India's most
valuable corporations through world class
performance, creating growing value for the
Indian economy and the Companys
stakeholders
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Some Vision Statements


TATA Steel
We aspire to be the global steel industry
benchmark for Value Creation and
Corporate Citizenship

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Mission
Mission statement makes the vision
statement more tangible and
comprehensible
A mission statement clearly specifies:
Why the organisation exists or Purpose
What differentiates the org from others or
the Identity
The basic beliefs, values and philosophy
of the organisation
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Mission
At the top of goal hierarchy
The organizations reason for existence and often
reveals corporate philosophy and purpose
Mission describes organizational values,
aspirations and is the basis for development for
subsequent goals and plans
A formal mission statement is a broadly stated
definition of basic business scope and operations
that distinguishes the organization from similar
others
Mission statement often focuses on customers,
market and businesses

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Key elements of the mission


statement
Obligation the firm holds to its
stakeholders
The scope of the business
Sources of competitive advantage
The organisations view of the future

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Vision vs. Mission


The vision is more broad and future
oriented the goal on the horizon
The mission is more focused how
you will get to the horizon

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Importance of Vision & Mission


Serves as a basis to enable a sense of common
purpose throughout the organisation.
It enables management to take important
decisions such as allocating organisational
resources
It is like a platform that helps in providing direction
to managers and employees in taking day to day
decisions.
It facilitates delegation of authority and
responsibility
It helps in evaluating individual performances by
comparing them with the objectives.

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Core Values of the Firm


Represents the commonly held beliefs,
mindset and assumptions that shape how
the organisation functions as an entity.
Respect for people, integrity, sense of
urgency, Networking, creativity,
Empowerment, courage etc

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VISION & MISSION OF ADITYA


BIRLA GROUP
Our Vision
To be a premium global conglomerate
with a clear focus on each business.
Our Mission
To deliver superior value to our customers,
shareholders, employees and
society at large.

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Our Values

Integrity
Commitment
Passion
Seamlessness
Speed

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VISION OF ITC
Sustain ITC's position as one of India's
most valuable corporations through world
class performance, creating growing value
for the Indian economy and the
Companys stakeholders

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MISSION OF ITC
To enhance the wealth generating
capability of the enterprise in a globalising
environment, delivering superior and
sustainable stakeholder value

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VISION OF TATA Steel


We aspire to be the global steel
industry benchmark for Value
Creation and Corporate Citizenship

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Mission of TATA Steel


Consistent with the vision and values of the founder
Jamsetji Tata, Tata Steel strives to strengthen Indias
industrial base through the effective utilization of staff
and materials. The means envisaged to achieve this are
high technology and productivity, consistent with modern
management practices.
Tata Steel recognizes that while honesty and integrity
are the essential ingredients of a strong and stable
enterprise, profitability provides the main spark for
economic activity.
Overall, the Company seeks to scale the heights of
excellence in all that it does in an atmosphere free from
fear, and thereby reaffirms its faith in democratic values.

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Goals,Objectives and Plans


Goals provides the basis for action towards
the achievement of organisations mission.
Goals are both financial and non financial
Objectives are operational definition of the
organisations goals. They provide the
measurable parameters for monitoring
/evaluating the performance of the org.
Plans indicate the specific actions that will
be taken by the organisation in order to
achieve the objectives.

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Goals,Objectives and Plans

Objectives growth objectives


Performance leadership
Human resource Development
Financial soundness
Technology leadership
Sustainable power development
Research and development