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Strategic management involves the process of formulation and implementation and analysis of the
major strategies and initiatives taken by an organization's, based on consideration of resources and an
assessment of the internal and external environments in which the organization operates
1. Goal/Objective oriented.
2. Strategy is Multidisciplinary oriented (Strategy affect on overall dept of firm)
3. Strategy is Hierarchical (Corporate, Business, Functional Level)
4. Future oriented.
5. Long-term implication
6. Strategic management is fundamental
7. Complex
8. Universal applicability.
Objective Oriented:
The business strategies are objectives oriented and are directed towards organizational goal. To formulate
strategies the business should know the objectives that are to be pursued.
For example if any business want to achieve growth then it has to set following objectives.
a) To increase market share.
b) To increase customers satisfaction.
c) To enhance the goodwill of the firm.
Future Oriented: Strategy is future oriented plan and formulated to attain future position of the
organization. Therefore strategy enables management to study the present position of organization and
decides to attain the future position of the organization. This is possible because strategy answer
question relating to the following aspects.
a) Prosperity of the business in future.
b) The profitability of the business in future.
c) The scope to develop and grow in future in different business.
Strategy is multidisciplinary:
Strategy involves marketing, finance, human resource and operations to formulate and implement
strategy. Strategy takes a holistic view. It is multidisciplinary as a new strategy influences all the
functional areas, i.e., marketing, financial, human resource, and operations.
Strategy is hierarchical:
On the top come corporate strategies, then come business unit strategies, and finally functional
strategies. Corporate strategies are decided by the top management, Business Unit level strategies by
the top people of individual strategic business units, and the functional strategies are decided by the
functional heads.
Long-term implication
Strategic management is not concerned with day-to-day operation. It has long-term implications. It
deals with vision, mission and objective.
Fundamental:
Strategic management is fundamental for improving the long-term performance of the organization.
Complex :Uncertainly brings complexity for strategic management. Managers face environment which
is difficult to comprehend. External and internal environment is analyzed.
Universally Applicable:
Strategies are universally applicable and accepted irrespective of business nature and size. Every
business unit designs strategy for its survival and growth. The presence of strategy keeps business
moving in right direction.
Strategies formed at this level are comprehensive (complete) plans providing objectives for SBUs,
allocation of resources and coordination of the SBUs for optimal performance.
At this level the strategies decided at corporate level, are translated into concrete objectives and
strategies for individual business.
At this level the courses of action are adopted by an organization for each of its business separately
to serve particular customer group or groups, for providing value to the customers by satisfying
their needs.
At business level an organization decides that it would take which route to achieve its corporate
objectives.
While business strategy, less comprehensive, defines the choice of product or service and market of
individual business within the firm.
Functional strategies
Functional strategies are designed to emphasize functional competencies so that firms can gain the
competitive advantage.
These strategies are designed and developed by the functional heads, and are approved by the top
management.
Functional strategy deals with plan providing objectives for specific function, allocation of resources
among different operations within that functional area and coordination between them for optimal
contribution to the achievement of the SBU and corporate-level objectives.
The operational strategy mainly includes production strategies, marketing strategies, financial
strategy and human resources strategy.
Below the functional-level strategy, there may be operations level strategies as each function may be
dividend into several sub functions. For example, marketing strategy, a functional strategy, can be
subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy
contributing to functional strategy
strategy Tactics
Long term goals Short term goals
strategy is developed at the highest level Tactics is employed at and relates to lower
of management levels of management.
The formulation of strategy is both Tactics is determined on a periodic basis by
continuous and irregular various organizations.
Strategy has a long-term perspective; Time horizon of tactics is short-run and
definite
uncertainty is higher in the case of Tactical decisions are more certain
strategy
Strategies are most important factors of Tactics are of less importance because they
organization because they decide the are concerned with specific part of the
future course of action for the organization.
organization
What are the Benefits of strategic management?
Prevents problems(Strategic management serves as a corporate defense mechanism against
mistakes and pitfalls)
Strategic management is concerned with ensuring a good future for the firm.
Better understanding of changing environment
It results in better decisions
Strengthens competitive position
It improves coordination, delegation, co-ordination monitoring, performance evaluation and
control
Identification of the strengths and weaknesses may help an organization to take measures.
It results future oriented and dynamic.
It allows for identification, prioritization, and exploitation of opportunities.
It provides an objective view of management problems.
It represents a framework for improved coordination and control of activities.
It minimizes the effects of adverse conditions and changes.
It allows major decisions to better support established objectives.
It allows more effective allocation of time and resources to identified opportunities.
It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions.
It creates a framework for internal communication among personnel.
It helps integrate the behavior of individuals into a total effort.
It provides a basis for clarifying individual responsibilities.
It encourages forward thinking.
It provides a cooperative, integrated, and enthusiastic approach to tackling problems and
opportunities.
It encourages a favorable attitude toward change.
It gives a degree of discipline and formality to the management of a business.
Choice of Strategy:-
Strategic management helps to management to select the best possible strategy option. Then it may be
internal or external growth of the organization. For example in case of internal growth it may adopt
intensification or diversification strategy.
SWOT Analysis:- A thorough analysis of internal and external environment of a business enables to
identify the strength and weakness as well as threats and opportunities of the business.
This helps the business to keep pace with the changing nature of the environment affecting to the firm.
And this is possible only with the help of strategic management.
Organizing Resources:- business objectives can be accomplish with the help of proper allocation and
utilization of resources. This is possible only with the systematic plan, which is the result of strategic
management.
Helps in Evaluation:- the important aspect of strategic management is evaluation of plans or strategy.
Here the actual performance will be compared with standards set and if any variation is found then the
corrective measures are taken.
Facilitates Communication and Coordination:- as the strategies are well planned. For its proper
execution there is need to have proper communication and coordination at all levels of operations.
Helps to face Competition:- strategic management enables a firm to meet competition more effectively.
This is because strategic management enables to develop effective strategies to face the competition.
What are the Risks/Pitfall of strategic Management or firm do not do strategic management?
Negative impacts on operational responsibilities
Time consumption is more in strategy formulating
Active participation of top management is needed & authorize proper allocation of resources
Strategic manager must be trained and respond to disappointed subordinates
Failing to communicate strategy to employees
if the implementation of strategy is not effective, even an excellent strategy would not produce
expected result
strategic planning is a complex and difficult task which requires people with vision, expertise and
commitment and appropriate system.
Other pitfall of strategic management
Lack of knowledge or experience in strategic planning—No training in strategic planning.
Poor reward structures—When an organization assumes success, it often fails to reward success.
When failure occurs, then the firm may punish.
Firefighting—An organization can be so deeply embroiled in resolving crises and firefighting that
it reserves no time for planning.
Waste of time—some firms see planning as a waste of time because no marketable product is
produced. Time spent on planning is an investment.
Too expensive—some organizations see planning as too expensive in time and money.
Laziness—People may not want to put forth the effort needed to formulate a plan.
Fear of failure—By not taking action, there is little risk of failure unless a problem is urgent and
pressing. Whenever something worthwhile is attempted, there is some risk of failure.
Overconfidence—As managers amass experience, they may rely less on formalized planning.
Rarely, however, is this appropriate. Being overconfident or overestimating experience can bring
demise. Forethought is rarely wasted and is often the mark of professionalism.
Prior bad experience—People may have had a previous bad experience with planning, that is,
cases in which plans have been long, cumbersome, impractical, or inflexible. Planning, like anything
else, can be done badly.
Self-interest—When someone has achieved status, privilege, or self-esteem through effectively
using an old system, he or she often sees a new plan as a threat.
Fear of the unknown—People may be uncertain of their abilities to learn new skills, of their
aptitude with new systems, or of their ability to take on new roles.
Honest difference of opinion—People may sincerely believe the plan is wrong. They may view the
situation from a different viewpoint, or they may have aspirations for themselves or the
organization that are different from the plan. Different people in different jobs have different
perceptions of a situation.
Failing to communicate the plan to employees, who continue working in the dark
Top managers making many intuitive decisions that conflict with the formal plan
Top managers not actively supporting the strategic-planning process
Failing to use plans as a standard for measuring performance
Delegating planning to a “planner” rather than involving all managers
Failing to involve key employees in all phases of planning
Failing to create a collaborative climate supportive of change
Viewing planning as unnecessary or unimportant
Suspicion—Employees may not trust management.
Problem in Analyzing Environment: - the success of strategic management is depend on the correct
analysis of internal as well as external environment. Here especially the external environment scanning is
important to grab opportunities which many times does not proved.
Unrealistic Mission and Objectives: - if the mission and objectives are not realistic then the strategic
management can’t be successful.
Problem of Setting Target: - sometimes it happens that the strategists may be very enthusiastic so they
may set unrealistic goal which will be difficult to accomplish.
Problem in Implementation:- implementation of strategy is important if it is not implemented well then
there may be problem, the strategy may not give the desired result.
Lack of Commitment of Lower Level:- generally the strategies are framed by top level management and
at the time of framing if top level management has not consulted with lower then lower level management
may not be that much committed. In other word they being unaware of the plans may not give desired
performance. Their dedication may not be there up to expected level.
Problem of Resistance: - there may be resistance on the part of employees to accept the set target of the
top management.
More theoretical in Nature:-as per experts opinion strategic management is more theoretical. In practice
there are different so it remains unsuccessful.
Problem of Internal Politics:-in organizations, there are differences among or between departments. So
as there is no good relation, proper coordination, strategies became unsuccessful
1. Environmental scanning
2. Strategy formulation
3. Strategy implementation
4. Strategy evaluation or control
Environmental scanning
The environmental scan includes the following components:
Internal analysis of the firm
Analysis of the firm's industry (task environment)
External microenvironment (PEST analysis)
The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals
opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by
means of a SWOT analysis.
An industry analysis can be performed using a framework developed by Michael Porter known as Porter's
five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry
rivalry
Environmental scanning refers to a process of collecting, scrutinizing and providing information for
strategic purposes. It helps in analyzing the internal and external factors influencing an organization.
After executing the environmental analysis process, management should evaluate it on a continuous basis
and strive to improve it
Mission and Objectives
A Mission statement attempts to answer:
What is the reason/basic purpose for being in the business?
What would be the future of the business in next coming years?
Who should be principal customers, clients?
What are the basic beliefs, values, aspirations & priorities of the firm?
The mission statement describes the company's business vision, including the unchanging Values and
purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.
Guided by the business vision, the firm's leaders can 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
Formulating strategies
Strategy formulation includes developing a vision and mission, identifying an organization’s external
opportunities and threats, determining internal strengths and weaknesses, establishing long-term
objectives, generating alternative strategies, and choosing particular strategies to pursue.
Strategy-formulation issues include deciding what new businesses to enter, what businesses to abandon,
how to allocate resources, whether to expand operations or diversify, whether to enter international
markets, whether to merge or form a joint venture, and how to avoid a hostile takeover.
After environmental analysis the firm must Develop and evaluate strategic alternatives & Select
appropriate strategies for all levels in the organization that provide relative advantage over
competitors And also Match organizational strengths to environmental opportunities & take
Correct weaknesses and guard against threats
Strategy implementation:
Strategy implementation implies making the strategy work as intended or putting the organization’s
chosen strategy into action. Strategy implementation often is called the “action stage” of strategic
management.
Implementing strategy means mobilizing employees and managers to put formulated strategies into
action.
Strategy implementation requires a firm to establish annual objectives, devise policies, motivate
employees, and allocate resources so that formulated strategies can be executed. Strategy implementation
includes developing a strategy-supportive culture, creating an effective organizational structure,
redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking
employee compensation to organizational performance.
Strategy implementation requires personal discipline, commitment, and sacrifice. Successful strategy
implementation hinges upon managers’ ability to motivate employees, which is more an art than a science.
Strategies formulated but not implemented serve no useful purpose.
Strategy implementation includes designing the organization’s structure, distributing resources,
developing decision making process, and managing human resources.
The selected strategy is implemented by means of programs, budgets, and procedures.
Implementation involves organization of the firm's resources and motivation of the staff to
achieve objectives.
The way in which the strategy is implemented can have a significant impact on whether it will be
successful. In a large company, those who implement the strategy likely will be different people
from those who formulated it. For this reason, care must be taken to communicate the strategy
and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is
misunderstood or if lower level managers resist its implementation because they do not
understand why the particular strategy was selected.
Relation to present
activities Innovative Mixed Supplementary
Strategic management is a means to achieve the mission and objectives of the organization.
Hence any lack of realism or other limitation of the mission or objectives would naturally get
reflected in the strategy.
Another problem is that strategic planning is a complex and difficult task which requires people
with vision, expertise and commitment and appropriate system.
An important limitation of strategic management is that if the implementation of strategy is not
effective, even an excellent strategy would not produce expected result
Negative impacts on operational responsibilities
Time consumption is more in strategy formulating
Active participation of top management is needed & authorize proper allocation of resoureces
Strategic manager must be trained and respond to disappointed subordinates
Define Mission
It states the Purpose/reason for the existence of the organization. It defines product, market and
competitive scope for the long term.
The mission statement defines what an organization does and includes tangible goals which the
organization strives to accomplish.
It describes values, beliefs, philosophies, priorities and commitment of the organization. It projects the
image of the organization. It answers "what is our business?" It defined the business and its sources of
competitive advantage.
Mission statement questions look like:
What do we do?
Whom do we serve?
How do we serve them?
Example Company: Amazon
Mission: We try hard to offer our customers the lowest possible prices, the best available selection, and
the utmost convenience.
Define Vision
A vision statement identifies where the organization wants or intends to be in future or where it should
be to best meet the needs of the stakeholders. It describes dreams and aspirations for future.
Example: Wal-Mart’s vision is to become worldwide leader in retailing.
Example Company: Amazon
Vision: To become one of the topmost Earth’s most customer-centric companies, where customers can
find and discover anything they might want to buy online.
Difference b/w
Mission Vision
Purpose of the company in market A vision statement is a clear,
definitive statement of what you
want to accomplish
Its present oriented Unlike the mission statement, it is
future oriented.
Mission statements often start with Vision statements often start with
statements such as, "We provide…" or "We statements such as, "Where we
offer…" or "We are a…" want go or where we want to reach
It defines the day-to-day activities of the work Its future achievable oriented
they do, and every person who works activities.
Amazon Mission: We try hard to offer our Amazon
customers the lowest possible prices, the best Vision: To become one of the
available selection, and the utmost topmost Earth’s most customer-
convenience. centric companies, where
customers can find and discover
anything they might want to buy
online.
1. It should be feasible
2. It should be precise.
3. It should be distinctive.
4. It should be motivating.
5. It should indicate how objectives
6. It should be clear.
7. They Are Realistic
8. They Are Memorable
9. They Are Active
It should be feasible
A mission should always aim high but it should not be an impossible statement. It should be realistic
and achievable its followers must find it to be credible. But feasibility depends on the resources
available to work towards a mission. In the sixties, the US National Aeronautics and Space
Administration (NASA) had a mission to land on the moon. It was a feasible mission that was
ultimately realized.
It should be motivating.
A mission statement should be motivating for members of the organization and of society, and they
should feel it worthwhile working for such an organization or being its customers. A bank, which lays
great emphasis on customer service, is likely to motivate its employees to serve its customers well and
to attract clients. Customer service, therefore is an important purpose for a banking institution.
It should be precise.
A mission statement should not be so narrow as to restrict the organization’s activities nor should it be
too broad to make itself meaningless. For instance, ‘Manufacturing bicycles’ is a narrow mission
statement since it severely limits the organization’s activities, while mobility business’ is too broad a
term, as it does not define the reasonable contour within which the organization could operate.
It should be clear.
A mission should be clear enough to lead to action. It should not be a high sounding set of platitudes
meant for publicity purposes. Many organizations do adopt such statements but probably they do so for
emphasizing their identity and character. For example, Asian Paints stresses leadership through
excellence’, while India Today see itself as ‘the complete news magazine’. The Administrative Staff
College of India considers itself as ‘the college for practicing managers’ and Bajaj Auto believes in
‘Providing, value for money, for years’. To be useful, a mission statement should be clear enough to lead
to action. The ITC’s stated corporate philosophy of aligning its organizational activities with national
priorities helps it in choosing areas for diversification like the hotel, paper and agro industry.
Some companies fall into the trap of crafting mission statements that are so grandiose and
philosophical that they lose all touch with reality. Mission statements must be grounded in what your
company provides customers in the present. Save the inspirational and future-based language for your
vision statement.
What are the key phrases and terminology you can use in your mission statement to make it
memorable? That doesn’t mean that readers must be able to recite your mission statement in whole as
if it’s a catchphrase, but it does mean that people should be able to associate key aspects of that
statement with your company.
It should be distinctive. A mission statement, which is indiscriminate, is likely to have little impact. If
all scooter manufacturers defined their mission in a similar fashion, there would not be much of a
difference among them. But if one defines it as providing scooters that would provide ‘value for money,
for years’ it will create an important distinction in the public mind.
The word “active” in this context refers to active verbs that make readers feel as if something is
happening now rather than in the past. For example, instead of writing, “These products are made by
our company to improve your life,” you should write, “Our company makes these products to enhance
your quality of life.” Notice how the transition from passive to active verbs, and substituting “enhance
your quality of life” for “improve your life” conveys a stronger message?
A strong mission statement is something that your marketing and product development teams can also
use for motivation and direction. For example, eyeglass brand Warby Parker’s mission statement is,
"Warby Parker was founded with a rebellious spirit and a lofty objective: to offer designer eyewear at a
revolutionary price, while leading the way for socially conscious businesses." The concepts of
“rebellious spirit,” “revolutionary price,” and “socially conscious businesses” are all a marketing
department’s dream because they are sellable concepts.
Define Objectives and explan the types of objectives: The desired or needed result to be achieved
by a company in specific time.
2types of objectives
1. Financial objectives
2. Strategic objective
Strategic objectives deal with the firm's position in the model. You might do this, for example, by
positioning the firm relative to the external forces – bargaining power of customers, bargaining power
of suppliers, threat of new entrants, threat of substitutes, and competition within the industry – that
can impact a business. Strategic objectives might include expanding market share, changing market
position or under-cutting a competitor's costs.
A strategic objective focuses on
winning additional market share,
overtaking key competitors on product quality or customer service or product innovation,
achieving lower overall costs than rivals,
boosting the company’s reputation with customers, winning a stronger foothold in international
markets, exercising technological leadership,
gaining a sustainable competitive advantage, and
capturing attractive growth opportunities
Financial Objectives
Managers/ Firm use financial objectives to measure strategic performance. For example, if the firm's
strategic objective is to increase efficiency, the financial objective could be to increase return on assets
or return on capital. Financial objectives, derived from management accounting, are more concrete.
Create direction and guidance: Every business needs guidelines. Objectives direct the company's
activities toward achieving the goals and visions of the owners.
Motivate employees: Employees become more enthusiastic and spirited in their work when they
know what is expected of them. Their work is more directed with less wasted time. They get
particularly interested when they learn about the rewards for meeting and exceeding their objectives. If
employees don't have the skills for their jobs, they are inspired to learn more and find ways to improve
their performance.
Develop structure of project plans: Objectives form the structure for project development and
measurement of performance along the way. Applying objectives to a project defines the timeline of
activities needed to complete the plan. A business that does not have defined objectives is wandering,
lost in the woods. The likelihood of success is remote, since people in the business are not certain as to
where they should be going. A business owner has a vision of his company, and the objectives are the
reasons to communicate his ideas to employees.
Goal
The aim or target which the firm wants to achieve with out a given specified period is known as
the Goal.
Ex:I want to achieve success in the field of genetic research and do what no one has ever done.