Introduction to Strategy Management

Objectives
In this chapter, it is proposed to introduce you to the definitions of strategic management and its
importance, benefits and its limitations. Further, this chapter will elucidate the vision and
mission of an organization, how to formulate a strategy for the organization, how to implement it
and how to evaluate it and control the same. It will showcase the various types of strategies, how
to choose a particular strategy for the organization and then analyze it.
Meaning, Essence & Nature of Strategy
Strategy is fundamental to an organization's survival and growth. It makes the difference
between an organization's success and failure. A strategy is an organization's game plan to deal
with competition.
The essence of strategic management is to achieve and maintain competitive advantage.
Competitive advantage is anything that an organization does better than its competitors. For
example, it could be that an organization has better distribution network, has fewer fixed assets
or has access to cheaper raw products for manufacturing than its competitors.
Definition of Strategic Management
Several definitions exist in strategic management literature.
Some are given below along:
A company's strategy consists of the combination of competitive moves and business approaches
that managers employ to please customers, compete successfully, and achieve organizational
objectives (Thompson & Strickland, 2001).
Michael Porter defines strategy as developing and communicating the company's unique
position, making trade-offs, and forging fit among activities.
Strategic management is that set of decisions and actions which leads to the development of an
effective strategy or strategies to help achieve corporate objectives (W.F.Glueck).
Strategic management is primarily concerned with relating the organization to its environment,
formulating strategies to adapt to that environment, and, assuming that implementation of
strategies takes place (G.A. Steiner, J. B. Miner, E.R.Gray, 1982).
Strategic management can be defined as the art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an organization to achieve its objectives (F.R.
David).
The above definitions together should give a comprehensive view of the concept of strategic
management.
Strategic management and strategic planning
Strategic management and Strategic planning is used synonymously. However, strategic
management tends to get used more often in academia while strategic planning tends to get used
in the business world.
Sometimes, strategic management connotes formulation, implementation and evaluation of
strategy, while strategic planning refers to planning only.
Strategic Management Roots and Intent
Strategic management has strong roots in military. The word 'strategy' comes from the Greek
word 'Strategos' which means stratos (the army) and ago (to lead). Both military strategy and
business strategy aims to achieve competitive advantage. Both aim to leverage existing strengths
to exploit weaknesses of the competitors. Both must adapt to change and continually improve
and innovate to be successful. Terms such as objectives, mission, strengths and weaknesses have
origins in the military domain.

Levels & Importance of Strategy

Levels of strategic management
Strategic management, which includes formulation, implementation, and evaluation, can occur
at multiple hierarchical levels. These levels are 1) corporate level 2) strategic business unit
(SBU) level, and 3) functional level.
Corporate level strategies are concerned with the overall purpose or objectives of the
organization. For example, joint ventures, mergers & acquisitions etc. Strategic business unit or
division level strategies are concerned with the issues of the unit or division, and functional
strategies or operational strategies focus on functions like marketing, manufacturing, finance,
production, etc.
In single businesses, distinctions between corporate level and strategic business level strategies

do not exist. The most important aspect is that the strategies at these levels do not exist in
isolation but co-exist to support each other for the organization's success.
Benefits of Strategic Management
There are both financial and non-financial benefits of developing a strategy and implementing it.
The financial benefits are obvious and prevent bankruptcies, foreclosures, and liquidations. The
non-financial benefits of strategic management include: It allows an organization to be proactive
instead of reactive in shaping its future and in achieving its vision and mission.
It allows the use of systematic, informed, objective approach which results in a strategy
that has less potential to fail.

It allows an organization to identify, prioritize, and exploit opportunities.

It allows an organization to effectively allocate resources.

It allows for improved communication between functional departments, within

departments and across various levels of the organization, through the process of strategy
development.

It allows for an organization to generate higher level of involvement in the organizations

planning.

It allows an organization to empower its employees by increasing their participation

levels in decision making and allows for employee creativity.

Limitations of Strategic Management

Strategic management is not a prescription for success. It is an involved process where multiple
stakeholders within the company have to work together to develop a process and implement it. It
is a dynamic process at every level and there is no set mechanistic approach that will ensure its
success. There are several pitfalls in strategic planning that one must be aware of and seek to
avoid them. These pitfalls can occur at any of the three levels.
Analyzing Environment: The environmental factors that need to be analyzed are complex
and dynamic. Complete information of all the factors is rarely available. Hence,
organizations have to base their decisions on incomplete information. And focusing on
current problems only, without assessing the future opportunities and challenges may lead
to unsuccessful strategy formulation and failure.

Planning and Process Development: Strategic planning is not about control over decisions
and resources. It is not to be carried out for external approval like accreditations or
regulatory approvals. Too much planning and focus on process may lead to rigidity that
there's no room for course corrections. If the plan does not have any expectations against
which performance can be measured, then it is hard to make any course corrections.

Limitation in implementation: If the implementation lacks the support from top

management, or if the strategic process is not communicated to all levels of the
organization, or if the implementation lacks the support of all key decision makers within
the department, the strategy is bound to fail. And further, too many and frequent changes
in the plan can hinder the effective implementation.

Process of Strategy
Stages of strategic management
The strategic management process consists of four distinct stages (Figure 1).
Definition of organizational vision, mission, and objectives.
Strategy formulation.

 Strategy implementation of strategy.

Strategy evaluation and control.

The Strategic Management Framework

Definition of Organizational Vision and Mission
Any business must be defined. A vision and mission statement defines the business reasons for
existence. A mission statement is concerned with the present and vision statement is concerned
with the future. The mission statement answers the question: "what is our business?" and the
vision statement answers the question: "Where should be business go?" Or "What should be
business become?"
The mission statement should possess three features, viz., the organization's purpose should be
clear; the organization should have a clear customer orientation, and should state the social
objective.

Strategy Formulation
Once an organization's vision and mission statements are put in place, the process of strategy
formulation begins. Strategy formulation includes identifying an organizations external
opportunities and threats, determining internal strengths and weaknesses, establishing long-term
objectives, generating alternative strategies, and choosing particular strategies to pursue.
Some of the questions that the organization would address for strategy formulation would
include decisions such as:
What new businesses or markets to enter?

 What businesses to abandon?

Whether to expand operations?
Whether to diversify? And if so, into what domains?
How to allocate resources?
Whether to merge with other organizations or go for joint venture? Whether to acquire
organizations that will support business activities?
It is important to list all possible strategies that an organization can pursue because resources are
limited for any organization and it is necessary to develop several strategies which are feasible
and select the one(s) that will benefit the organization the most, in terms of achieving
competitive edge and improve its performance.
Strategy Implementation
Once a strategy or strategies is selected, the following step or steps involve its implementation.
This is called the action stage and is considered the most difficult stage. This requires an
organization to establish annual objectives, develop policies, allocate resources, communicate to
employees, and motivate employees to execute the chosen strategy. It includes developing a
culture that support the implementation of the chosen strategy, creating an effective
organizational structure, preparing budgets, developing and utilizing information systems, and
linking employee compensation to organizational performance.
Strategy implementation requires commitment from the employees at all levels, since it affects
organizational performance. At every hierarchical level - corporate, divisional or function,
decisions must be made to implement the strategy at their respective levels. Top management
must be able to communicate clearly and motivate employees to implement strategy.
Strategy Evaluation & Control
This is the final stage to assess to what extent the process of strategy implementation has been
successful. If there is evidence that a particular strategy or strategies are not working, it is
important to make decisions on: 1) whether the strategies should be continued or 2) whether the
way the strategies being implemented requires a different approach to implementation, and 3) if
so, what are the implications of making changes to the implementation process on the
organization's competitive position and on resources.

Strategy evaluation includes three steps 1) reviewing external and internal factors that formed
the basis of strategy selection 2) measuring performance against stated objectives and 3) taking
corrective measures. And all strategies are subject to modifications due to changing
circumstances in both the external and internal factors.

Environmental Scan & Internal Audit

The strategy formulation process begins with data. This process has to be carried out
systematically and in a rational manner. This requires collecting information which has to be
organized into qualitative and quantitative information such that effective decisions are made
under conditions of uncertainty.
This, by no means, implies that intuition, imagination, and creative thinking have no place in
strategy formulation. On the contrary, all of these aspects have increasing role to play when
decisions have to be made when it is becoming increasingly harder to predict the future in a
complex and dynamic environment. And strategy formulating is forward thinking process and is
predicated on the organization's best assessments of what future might bring.
Environmental Scan
The environmental scan is one of the key activities in the strategy formulation. This involves
studying the external opportunities and external threats which could come from sources such as:
economic, social, cultural, demographic, environmental, political, legal, governmental,
technological, role of intermediaries and suppliers, and competitive trends.
Any of the above mentioned sources or combination of sources could serve to benefit or harm
the organization in the future. And when opportunities or threats come from such sources, they
are less subject to control and hence are referred to as external sources.
Examples of external factors that may have impact on an organization's operations currently or
in the future include:
Economic factors such as inflation rates, GDP, GNP, income distribution etc.
Demographic factors such as population size, profiles, value system, and lifestyles.
Consumer choice is becoming increasingly complex. For example, consumers may be
increasingly concerned about the environment and hence seek environment-friendly

products
Marketing promotion is shifting to the internet.
In recession times, consumer spending reduced dramatically - discretionary incomes
reduce, consumers seek value from products.
The availability of skilled labor in international markets.
Government policies have a direct impact on business operations in a market.
Increasing globalization is leading to generation of global markets for the organization's
products.
Internal Audit
The next most important activity is to assess the organization internally. Identifying and
evaluating organizational strengths and weaknesses is an essential strategic management activity.
These may come from any functional areas - finance, marketing, operations, research and
development, or information systems. These typically include internal factors that are subject to
control. In order to gain competitive advantage, organizations aim to leverage the organizational
strengths and eliminate or reduce organizational weaknesses.
Internal factors can be determined by computing ratios, measuring performance, and comparing
with industry averages. Surveys can be developed to acquire and evaluate employee morale,
production efficiency, advertising effectiveness and customer loyalty.

Identification of Strategic Alternatives, Choice of Strategy

Strategies represent the actions to be taken to accomplish long-term objectives that yield desired
results. These expected results drive the choice of the strategy.
Types of Strategies
Strategies may be classified in many ways. One way is to classify them into integration
strategies, intensive strategies, diversification strategies, defensive strategies, and pre-emptive
strategies (Figure 2).

Integration Strategies
Integration strategies allow organizations to gain control over the intermediaries like distributors
and dealers, suppliers, and/or competitors. Integration strategies are further classified into
forward integration, backward integration, and horizontal integration.
Forward Integration involves gaining ownership or increased control over distributors or
retailers. For example, a manufacturer may pursue this strategy by establishing websites to sell
products to consumers directly. This strategy is effective when the organization's current
distributors become expensive, unreliable, or do not have the capacity to meet the organizational
needs. This is also effective when the organization has the resources to develop its own
distribution network, or there are high margins in the distribution channel that the organization
can appropriate this margin through self-distribution.
Backward Integration involves seeking ownership or increased control of the organization's
supplies. This strategy is effective when current suppliers are expensive, unreliable, or incapable
of meeting the organizational needs. When the suppliers are fewer and the number of
competitors is many, it is effective for the organization to gain control over the supplies. It is
also effective when an organization needs to acquire supplies quickly.
Horizontal Integration refers to a strategy of seeking ownership of or increased control over the
firm's competitors. This is one of the growth strategies which organizations employ today.
Mergers, acquisitions and takeovers among competitors can lead to increased economies of
scale, and transfer of valued resources and competencies. This is an effective strategy when an
organization is in a growth industry and economies of scale provide significant advantages or
when the organization does not currently possess a resource that can improve its performance in
the market.
Intensive Strategies
Intensive strategies allow organizations to improve its performance through a combination of
improving relative share in existing markets or enter new markets and by investing in their
products and services to cater to these markets. Intensive strategies are further classified into
market penetration, market development, and product development.
Market Penetration seeks to increase market share for current products and services by
increasing marketing efforts. This could include increasing the sales force, increasing
advertising, promotion, and publicity efforts. This is effective when the market is not yet
saturated, when usage rate can be increased amongst the product's consumers, or when shares of
competition is declining while total market is expanding.

Market Development introduces current products and services in new markets. New markets
could be either new consumer segment or new geographies. This is effective when new untapped
markets exist, when organization has excess production capacity, or when a need for the
products and services exist in other geographies.
Product Development seeks to increase sales by improving or modifying current products or
services. This involves investment in research and development and an understanding of the
consumer needs. This is effective to develop markets with modified products. Shampoo sachets
were introduced to cater to a segment which rarely bought shampoo due to perceived high costs.
The affordable sachet packs increased the company's volumes purchased and improved its
performance tremendously.
Diversification Strategies
Diversification can occur in two different ways - related and unrelated. Related diversification
involves when there is a fit of the diversified business with the current business processes where
synergy exists and unrelated diversification involves very dissimilar business processes.
Defensive Strategies
Organizations also have the option to adopt defensive strategies like retrenchment, divestment,
and liquidation. Retrenchment is adopted by cost reduction and asset reduction, streamlining
business in an effort to reverse decline. Divestment involves selling a business unit of the
organization, and liquidation involves selling of the organization's assets.
Pre-emptive Strategies
This follows the adage "Attack is the best form of defense". When organizations identify
possible threats, they take action ahead of competitors. In order to employ pre-emptive strategy,
organizations need to continuously monitor the market trends and competitors movements and
anticipated movements. They need to identify potential ways to block competitor moves while
ascertaining these strategies are consistent with the organization's current goals; are feasible in
terms of resources; and most importantly, the extent to which pre-emptive actions may affect
competitors' strategies.
In addition to the above classification, Porter identified four strategic options.
Porter's Strategies
According to Porter, competitive advantage can be gained through four strategic options - cost
leadership, focused cost leadership, differentiation and focused differentiation. These options are

based on cost leadership and differentiation in mass markets and niche markets.

The low-cost strategy offers products or services to a wide range of customers at the lowest price
in the market and the low-cost focus strategy that offers lowest price to a small group of
consumers.
The third strategy is differentiation where products and services are considered unique and are
directed to a large number of consumers who are price insensitive. The fourth is a focused
differentiation where products and services are considered unique and they fulfill needs of small
groups of consumers.

Generating Strategic Alternatives

A manageable set of strategic alternatives that are attractive and feasible must be generated. The
advantages, disadvantages, trade-offs, costs, and benefits must be determined.
Generating strategies is an exercise that is conducted after carrying out the external and internal
audit. The proposed strategies are discussed and ranked in order of attractiveness. Many
organizations pursue a combination of two or more strategies. This is a risky proposition since
organizational resources are limited and without prioritization, the implementation becomes
difficult.
Formulating these alternatives and selecting the appropriate strategy may be based on a 3-stage
integrated decision making framework - input stage, comparison stage, and decision stage.
Stage 1 is the input stage where basic information required for formulating strategies was put
together through environmental scan and internal audit.
Stage 2 compares the attractiveness of multiple strategies using techniques such as Strengths,
Weaknesses, Opportunities, Threats (SWOT) Matrix, the Boston Consulting Group (BCG)
Matrix, Strategic Position and Action Evaluation (SPACE) Matrix, and the Grand Strategy
Matrix.
Strengths, Weaknesses, Opportunities, Threats (SWOT) Matrix
This matrix (Figure 3) allows development of four types of strategies - Strengths-Opportunities
(SO), Weaknesses-Opportunities (WO), Strengths-Threats (ST), and Weaknesses-Threats (WT).
SO strategies leverage the organization's internal strengths to take advantage of external
opportunities. All efforts are directed towards this state.
WO strategies attempt to improve internal weaknesses by taking advantage of external
opportunities. For example, if there is a demand for a specific product feature in a market which
requires a particular technology, then the organization could seek to acquire this technology or
develop it.
ST strategies use the organization's strengths to avoid or reduce the impact of external threats.
WT strategies are defensive tactics directed at reducing internal weaknesses and avoiding
external threats. A typical SWOT matrix with examples is shown below:

Strategic Position and Action Evaluation (SPACE) Matrix

This is a four quadrant framework (Figure 4) that indicates whether aggressive, conservative,
defensive, or competitive strategies are most appropriate for the organization. In figure 4, the xaxis represents the competitive position (CP) on the one hand, and industry position (IP) on the
other. The y-axis represents the financial position (FP) of the organization on the one hand and
the stability position (SP) on the other. Examples of factors of financial position may include
ROI, working capital, cash flow, liquidity, earning per share etc. Factors of SP may include
inflation rates, demand variability, technological changes, etc. Factors of competitive position
may include market share, product quality, customer loyalty etc., and factors for industry
position may include growth potential, ease of entry, capacity utilization, profit potential etc.

The Boston Consulting Group (BCG) Matrix

When an organization has divisions that compete in different industries, a separate strategy may
be developed for each business. The BCG matrix (Figure 5) is applied in such multidivisional
organizations to formulate strategies.
The BCG Matrix essentially displays differences amongst the divisions of an organization in
terms of relative market share and industry growth rate.

The Grand Strategy Matrix

A popular tool today for formulating strategies allows for any organization to be placed in any
one of the four strategy quadrants (Figure 6).

And finally, Stage 3 is the decision stage where a quantitative technique may be employed to
make the final choice.
Selecting Strategy
Of all the feasible strategies, a choice has to be made out as to the most attractive strategy the
organization should implement.
Typically, the strategies are ranked in order of priority and based on subjective assessment.
However, one analytical technique called the Quantitative Strategic Planning Matrix (QSPM)
attempts to objectively assess which alternative strategies are best (Figure 7).
The steps in the process involve:
Identifying factors: This could be the organizations SWOT analysis or internal and
external factors.
Assign weights: Each factor is assigned a weight depending on its importance and/or
attractiveness.

 Assign scores to strategies: Each strategy is rated on a scale. This could be a 4 point scale
where '1'=least attractive, '2' =somewhat attractive, '3' =reasonably attractive and '4'
=highly attractive. It is important that the same score is not assigned to different strategies
on the same factor.
Calculate Total Attractiveness Score (TAS) by Factor: The factor attractiveness score is
calculated by multiplying the strategy score by the weight assigned.
Calculate Total Attractiveness Score by Strategy: The total attractiveness score is added
across all factors for each strategy.
The strategy with the highest total attractiveness score is the one that is selected. In the above
example, strategy 1 with a TAS of 5.85) is selected over Strategy 2 (TAS of 4.8). Note that some

factors may have no effect on the choice. The most important exercise is assigning scores to
each factor. These scores must have sound rationale in their assignment.

Implementation of strategy, evaluation & control

Implementation of Strategy
Just because an attractive strategy has been successfully selected does not ensure a successful
implementation. Strategic implementation involves managing resources - the efficient and
effective use of resources, operations and processes. It requires employee motivation and top
management support.
Strategy implementation may specifically involve - establishing annual objectives, devising
policies, allocating resources, modify existing organizational structure, match managers with
strategy, restructure, revise incentive plans, link performance and pay to strategies.
Strategy Review and Evaluation & Control
If an organization's external and internal environments change, the best formulated strategies can
become obsolete. Hence, the strategy implementation should be systematically and continually
reviewed, evaluated and modified as the need arises.
Strategy evaluation includes three basic activities - 1) reviewing the initial rationale of the
organization's strategy 2) comparing expected results with the actual results and 3) making
course-corrections to ensure plans and performances match.
Strategy evaluation is effective only if it is carried out in a timely manner and measures the right
parameters for taking appropriate action. It must be inexpensive and should not be
counterproductive.
Strategy evaluation process is complex and is increasingly getting more difficult today due to
increasing complexity in the environment making it harder and harder to predict future trends. In
addition, these factors are interlinked affecting an organization's activities, even if one factor
changes. Due to rapid changes, an organization has reduced time available for planning and
implementing to effect changes in business performance.
The Process of Strategy Evaluation

Strategy evaluation activities should be carried out continually instead of being carried out at
specific periodic intervals or just before problems occur. This allows effective monitoring and is
especially critical when strategy implementation takes many years.
The evaluation framework activities include asking questions both overall and specific.
Depending on these assessments corrective actions may be taken.
Have major changes occurred in the firm's internal and external strategic positions?
Has the organization progressed satisfactorily toward achieving its stated objectives?
Specific questions that can be addressed are:
How have competitors reacted to the organization's strategies?
How have they changed their strategies? And why?
Have the competitors' strengths and weaknesses changed?
Why are some competitors' strategies more successful than others?
How can the organization effectively cooperate with its competitors?
The strategy can be evaluated using multiple approaches.
Reviewing Initial Rationale of Strategy Formulation
The first would be use the bases of strategy formulation and assess whether the audit results are
still valid. Specific questions regarding organization's strategies can be addressed:
Are the internal strengths still strengths?
Have additional strengths been added? What are they?
Are the internal weaknesses still weaknesses?
Have the internal weaknesses reduced?
Have additional weaknesses been generated? What are they?

 Are the external opportunities still opportunities?

Are there new opportunities that need to be considered? If so, what are they?
Are the external threats still threats?
Have additional external threats emerged? If so, what are they?
Measuring Organization Performance
This activity includes comparing expected results to actual results, looking further into areas that
represent a difference between expected and actual results, and assessing the progress made
toward meeting stated objectives. Strategy evaluation is based on both quantitative and
qualitative criteria. Quantitative criteria commonly used to evaluate strategies are financial
ratios.
The organization's performance over different time periods can be compared, or the
organizations performance can be compared with that of the competition and industry averages.
The qualitative assessment can include evaluating the organizations balance of investments
between high-risk and low-risk projects, between long-term and short-term projects, between
slow-growth and highgrowth markets. It can also include anticipating competitor response to
chosen strategies or examining the interrelationship between the organization's internal and
external strategic factors.
Taking corrective action
The final strategy evaluation activity is taking corrective actions which require making changes
to reposition the organization competitively. This would involve possible changes in elements
that are considered at the beginning of the strategy implementation stage and carry the same
challenges in taking corrective action. The evaluation can lead to changes in strategy
formulation itself or in strategy implementation or both. The evaluation may also lead to no
changes at all.
The organizatio's employees need to be involved in the strategy evaluation stage so, any
resistance to change can be address through participation.
Any corrective action must be for the better. It should be feasible, involve manageable amount
of risk, and must continue to leverage the organization's strengths.

The Balanced Scorecard

The Balanced Scorecard is an important strategy evaluation tool, which was developed by
Kaplan and Norton (1992). It is a process that allows organizations to evaluate strategies from
four perspectives financial performance, customer knowledge, internal business processes, and
learning and growth. Each of these perspectives is expressed through its own objectives, targets,
initiatives, and measures. A properly developed scorecard balances between financial and nonfinancial evaluation, internal and external perspectives, and between short-term and long-term
success. Specifically, the organization seeks to evaluate whether it is improving and creating
value along measures such as innovation, technological leadership, product quality, operational
process efficiencies etc.; whether it is improving its core competencies and competitive
advantages; and whether the organization is meeting the customers' needs satisfactorily.
In Conclusion
The role of strategic management in today's competitive business world cannot be
underestimated. The organization's success is determined by a well-formulated strategy and
successful implementation. This is vital for any type of organization- private organizations,
public service organization, for profit and non-profit organizations, for small businesses and for
multinational organizations. And each of these types of organizations requires appropriate
strategy that meets the organizations missions.
The process of strategic management is involved and complex. For effective strategic
management process, the organization should ensure that it is a people process and include all
employees of the organization. It should ensure that the process is one of learning for the
organization. It should encourage open communication between and across levels for its strategy
to be successful.
Summary
1. Strategy is an' action' plan. All firms have a strategy even if it is informal.
2. Policy is different from strategy and strategy is different from tactics. Policy-strategytactics is the sequence in the management process.
3. Strategic management has been defined differently by different authors.
4. In any organization, strategy operates at three levels-corporate level, business unit level
and functional level.
5. Companies should always look for opportunities and seize them at the right time.

Organizations should take a proactive approach rather than a reactive approach.

6. The strategic management process embodies this approach to decision making.
7. There are benefits as well as a few limitations to the strategic management.
8. A good strategist plans and controls his plans whereas a bad strategist never plans and
then tries to control people.
MCQs
1. What is a corporate strategy?
a. A plan for clarifying who a company's customers are and what they value.
b. A plan describing where a company wants to be and how it intends to get there.
c. A plan spelling out your company's operational objectives for the next twelve
months.
Answer: b). A company's strategy consists of a plan for where it wants to go and how it
wants to get there. Managers formulate strategy by asking fundamental questions such as
these: Who are our customers, and what do they value? What products or services should
we offer them? How will our customers and competitors change over time? How can we
better position our company in our industry, given business trends? How can we
distinguish ourselves from our rivals to remain competitive despite changes in our playing
field?
2. Which of the following best describes the components of a strategic plan?
a. Direction statement, priority issues, strategic objectives and action plans.
b. Mission statement, the company's annual report, and analysis of industry trends.
c. Vision statement, market position and published statements to shareholders.
Answer: a). A direction statement lays out the company's mission (purpose), vision
(deeply desired future), business definition (offerings, customers, markets), competitive
advantages, core competencies and values. Examples of priority issues might include
customer loyalty or service. Each priority issue may have several corresponding highlevel strategic objectives---for example, "To increase customer loyalty, we need to boost
repeat orders 20% and develop a loyalty program by year-end". A single priority issue

may spawn two or three action plans----critical steps that must be taken to accomplish the
priority issues at the unit level.
3. Which of the following is not a key component of an action plan?
a. Required interlocks, or collaborations, between different departments.
b. Metrics for measuring progress toward each objective.
c. The rewards that will come with successful implementation of the plan.
Answer: c). Interlocks and metrics are components of an action plan. Rewards for
successful implementation of the plan are not, although managers should design a system
for evaluating and rewarding successful implementation. Decisions about how to evaluate
and reward performance are part of executing strategy, not components of an action plan.
4. If senior management has not delegated priority issues to your unit, how might you best
identify your unit's priority issues?
a. Brainstorm possible issues, and then evaluate whether they are realistic in light of
your unit's available resources.
b. Analyze external and internal factors and then assess your unit's strengths,
weaknesses, opportunities, and threats.
c. Find out which interdepartmental collaborations might be necessary for your unit
to support the corporate strategy.
Answer: b). By analyzing external and internal factors and then conducting a SWOT
analysis, you can identify priority issues that support the corporate strategy, play to your
team's strengths, and enable your group to leverage important new opportunities and avert
threats. Whereas strengths and weaknesses stem from a group's internal characteristics,
opportunities and threats generally come from outside a company.
5. Which of the following is the best example of a well- phrased strategic objective?
a. 'Have team members complete customer-service training'.
b. ' Raise sales 10% annually over the next three years'.
c. ' Provide better customer service than what all our rivals provide'.

Answer: b). This objective is phrased in a way that meets the SMART criteria: it is
specific, measurable, achievable, realistic and time-bound. Objectives that are phrased in
a way that don't meet these criteria are often vague or unrealistic, which makes them
difficult for employees to understand and carry out.
6. Your unit's action plans have just received approval from senior management. What is the
best way to ensure that your action plans remain aligned with your company's strategy in
the coming months?
a. Provide senior management monthly five-to-six page reports detailing what your
unit has accomplished during the month, as well as performance reviews for each
team member.
b. Provide senior management quarterly one-to-two page reviews that include what
your unit has and has not accomplished during the past three months, as well as any
key issues or other problems that need resolution.
c. Ask three to five members of your team to make a weekly presentation to senior
management; the presentation should address what your unit has or has not
accomplished, as well as any decisions that need to be made or resources that need
to be allocated.
Answer: b). Quarterly reviews are an efficient tool for assessing progress and checking
alignment. Units should submit short reports for each of the action plans they are working
on. These reports should address what the unit has accomplished, and what it has not
accomplished, what the unit has not accomplished but said it would, which key issues
need resolution, which decisions or resources the unit needs from senior management and
what the performance objectives are, if relevant.
7. Once senior management has approved your unit's action plans and allocated the required
resources, what do you do next?
a. Decide who will "own" the different tasks broadly defined in the plan.
b. Conduct a SWOT analysis to ensure that your action plan addresses all the
company's strengths, weaknesses, opportunities and threats.
c. Determine additional resources---including people, training, space, systems and
technology--- necessary to carry out the action plan.
Answer: a) Once corporate has allocated the necessary resources, your unit is ready to

execute its action plans. The first step is to establish accountability for each of the tasks
defined in each plan. Who will be responsible for what? Deciding exactly who should
own each task can be challenging, but this step is critical to effectively managed plan.
8. In implementing your unit's action plans, you have observed some resistance from a
valued team member. How should you address the situation?
a. Separate the person from your group immediately to prevent damage to team
morale--- perhaps by moving the person to a position where he can contribute more
willingly.
b. Provide the person with information about why the company's strategy is
necessary, encourage participation in articulating and implementing the strategy,
and use coaching to address the resistance.
c. Before actively addressing the situation, give the person adequate time to adapt and
overcome any resistance.
Answer: b). It is important to address any resistance to your strategic plan promptly.
Otherwise the plan may fail. Begin by providing information about the strategy,
encouraging participation in its implementation, and coaching team members whom you
value. If these measures are not successful, then it is best to separate such individuals
from the group to a different part of the organization.
9. You want to assess your group's implementation of a strategic initiative. In addition to
evaluating the group's performance on objectively defined metrics, you need to consider
other criteria as well. Which one of the following criteria would you not be likely to use?
a. Creativity--- the group's ability to devise fresh ways of accomplishing a job.
b. Timeliness--- whether the group has successfully accomplished its tasks within the
time frame stated in the original plan.
c. Knowledge and learning---how deeply the team understands the company's
business and the team's role in supporting the corporate strategy.
Answer: b). If you have already evaluated objectively defined metrics, you have probably
included timeliness. In addition to objective accomplishments, managers also need to
evaluate more subjective criteria for performance---such as creativity, knowledge and
learning, teamwork, presentation skills, and ability to plan. These skills and attitudes play

a crucial role in your team's ability to carry out your unit's action plans effectively.
10.How can you best reward your team members for successfully implementing your
company's strategy?
a. Emphasize the possibility of public recognition for all team members'
accomplishments, including memos of praise to upper management.
b. Combine your available financial and nonfinancial rewards, and customize them
according to each team member's reward values.
c. Make monetary compensation (whether it is raises, bonuses, or stock options) the
centerpiece of your reward system.
Answer: b). Often the most effective reward system in Indian conditions, is both financial
and nonfinancial rewards which are customized to meet individuals' preferences.
Questions:
1. Distinguish between strategic management and operational management in terms of
different levels of management.
2. Discuss the vision and mission statements of a government as well as a private
organization taking practical examples.
3. Mention some of the benefits of strategic management.
4. What are the major limitations of strategic management?
5. What are the various types of strategies?
6. Explain the method of selecting a strategy among the various alternatives.
Suggested for further reading:
1. David F. R 2003; Strategic Management: Concepts and Cases 13th edition
2. Nag A. 2011; Strategic Management: Analysis, Implementation and Control
3. Alkhafaji A. F. 2003; Strategic Management

4. Thompson A .A. Jr and A.J.Strickland 2001; Strategic Management: Concept and Cases