c
 


 

     
 


   
 

 
   

 
  

  : The term strategic management has been traditionally used. New title such as
business policy, corporate strategy and policy, corporate policies is essentially and extensively
used which means more less the same concept.

  c
  

 :

÷
n early 1920¶s and 1930¶s the managers used day-to-day planning methods to perform any
task.


To anticipate the future, they tried using tools like preparation of budgets and control systems
like capital budgeting and management by objectives.


The techniques were unable to emphasize the future adequately.


The next step was they tried using long range planning which was replaced by strategic
planning and later by strategic management.


n mid 1930¶s, according to the nature of business the planning was done during Adhoc policy
making.


As many businesses had just started operations and were mostly in a single product line, there
arose a need for policy making.


As companies grew they expanded their products and they catered to more customers and
which in turn increased their geographical coverage.

The expansion brought in complexity and lot of changes in the external environment. Hence
there was a need to integrate functional areas.


This integration was brought about by framing policies to guide managerial action.

÷
ÿolicies helped to have pre-defined set of actions, which helped people to make decision.

÷÷
ÿolicymaking was the owner¶s prime responsibility.

÷
Due to increase in the environment changes, in 1930¶s and 40¶s policy formulation replaced
ad-hoc policy making, which led to emphasis shifted to the integration of functional areas in this
rapidly changing environment.

÷
Especially after  World War there was more complexity and significant changes in the
environment.
÷
-ompetition increased with many companies entering into the market.

÷
ÿolicy making and functional area integration was not sufficient for the complex needs of a
business.

ROLE OF STRATEG- MANAGEMENT: -

1) Due to increase in the competition, in 1960¶s there was a demand for critical look at the
bane corrupt of business.

2) The environment played an important role in the business.

3) The relationship of business with the environment leads to the concept of strategy.

4) n early sixties, this helped the management to manage between the business and the
environment.

5) n early eighties, as many companies were globalised which lead to the competition of the
rivals access the world.

6) Japanese companies along with other Asian companies unleashed a force across the world
and posed a threat for the US and European companies, which led to the current thinking.

7) Strategic management focused on 2 aspects: -

!? Strategic process of business.

!? Responsibilities of strategic management.

Unlike others, in this phase the role of senior management is vital and of utmost importance.
Their role was important in decision-making like -

a) Whether a company promotes a joint venture/new decision.

b) Decides to go for an expansion.

c) Takes other important actions.

8) All these actions and decision had a long-term impact on the company and its future
operations, which was the result of senior management decision-making.

9) Strategic management is both about the present and future course of action, which was the
prime responsibility senior management.

Strategic Management is

1.? . The study of function and responsibilities of senior management

 2.? . A crucial problem that affects success in total enterprise.
3.? . The decision that determine the direction of the organization and shape of its
future
4.?  . dentity and molding of its character
5.? . Mobilization and their allocation of the resources.

Hence as managers had variety of choices, decisions were based on the circumstances, which
would take the company in specified directions.

MÿORTAN-E AND ROLE OF MANAGERS N STRATEG- MANAGEMENT: -

1.? . Strategic management integrates the knowledge and experience gained in various
functional areas.
2.? . t helps to understand and make sense of complex interaction in various areas of
management.
3.? . t helps in understanding how policies are formulated and in creating appreciation
of complexities of environment that the senior management faces in policy formulation.
4.?  . Managers need to begin by gaining an understanding of the business environment
and to in control.

Ñ

 
  
 
 .

a) They should know to manage and understand information technology, which is changing
the face of business.

b) As public and common investors own and more companies managers need to acquire skills
to maximize shareholder value.

c) To have/take a strategic perspective, managers should foresee the future and track changes
in customer expectation. ntuitive, logic reasoning is required for proper decision-making.

d) Successful companies depend on people. For people, management managers should create
capability for imitating and manage things through leadership and should possess qualities like
patience, commitment and perseverance.

e) Managers need to provide speed responses to environmental changes through informational

systems and organizational process.

f) As corporates are becoming more integrated with the public life, corporate governance is
becoming important which manager may have to practice.

g) Managers should learn to deal with confused and complex situations. They should know to
deal with global managers, business protocols and market conditions.

h) n complex and certain situations, managers should have the courage in decision-making to
make unconventional decisions.
i) Managers should possess high ethical standards in business and focus on social
responsibility.

-onclusion

Thus we can say the purpose of strategic management is manifold. To be successful in the
business one should possess/have holistic approach and should know to integrate the knowledge
gained in various functional area of management. By having generalistic approach, a senior
manager can understand the complex inter linkages operating within the organisation and should
have systematic approach in decision-making in relation with the changes which takes place in
the environment.

Q2. What is strategy? At what levels is it formulated?

NTRODU-TON: -

To understand the process of strategic management the concept should be understood and
controlled. The term strategy is derived from the Greek word ³STRATEGOS´ à Generalship.
The actual direction of military force, as distinct from governing its deployment. The word
strategy means ³ THE ART OF GENERAL ´. Based on the studies and views by various experts
and management gurus Strategy in business has taken various connotations.

STRATEGY:

1.? Before making a decision managers have to look into the course of deciding since

Strategy involves situations like

a) How to face the competition.

b) Whether to undertake expansions/diversification

c) To be focused/ broad based

d) How to chart a turn around

e) Ensuring stability/should we go in for disinvestments etc

1.? An establishment and successful company would start to face new threats in the
environment. This is due to its success and emergence of new competitors. t has to
rethink the course of action it has been following. This is called strategy.
2.? With such rethinking and environment analysis, new opportunities may emerge and be
identified.
3.? To make use of these opportunities, the company might fundamentally rethink and reason
the ways and means, the actions it had been following in the past. These are called
³ strategies ³.
 4.? For a company to survive and to be successful strategy is one of the most significant
concepts to emerge in the field of management. According to Alfred chandler the
determination of basic long-term goals and objectives of an enterprise and the adoption of
the course of action and the allocation of resources for carrying out these goals.

William Gluck defines strategy as ³a unified, comprehension and integrated plan designed to
assure that the basic objectives of the enterprises are achieved´.

1.? Michael ÿorter views strategy as the ³ core of general management is strategy´.

Managers must make companies flexible, respond rapidly, benchmark the best practices,
outsource aggressively, develop core competencies; nfact should know how to play new roles
everyday. Hyper competition is a common phenomenon that rivals copy very fast.

1.? -ompanies can outperform rivals only if it can establish a difference it can preserve and
deliver greater value at a reasonable cost.
2.? Strategy rests on unique activities ±³ The essence of strategy is in the activities ±
choosing to perform things differently and to perform different activities than rivals´.
3.? Strategy is long term. f company focus is only on operational effectiveness. t can
become good and not better. Overemphasis on growth leads to the dilutions of strategy.
Growth is achieved by deepening strategy.

10. Strategy is the future plan of action, which relates to the companies activities and its
mission/vision i.e. when it would like to reach from its current position.

11. t is concerned with the resource available today and those that will be required for the
future plan of action. t is about the trade off between its different activities and creating a fit
among these activities.

LE ELS OF STRATEGY:

1) When a company performs different business/ has portfolio of products, the company will
organize itself in the form of strategic business units (SBU¶s).

2) n order to segregate different units each performing a common set of activities, many
companies are organized on the basis of operating divisions/decisions. These are known as
strategic business units.

-ORÿORATE LE EL

FUN-TONAL LE EL STRTEGES
[-ORÿORATE]

SBU1 SBU2 SBU3

(SBU LE EL)
 FUN-TONAL LE EL STRATEGES

3) Strategies are looked at

v -orporate level

v SBU level

4) There exists a difference at functional levels like marketing, finance, productions etc.
Functional level strategies exist at both corporate and SBU level. t has to be aligned and
integrated.

5) -ORÿORATE LE EL STRATEGY: t¶s a broad level strategy and all its plan of actions is at
corporate level i.e. what the company as a whole. t covers the various strategies performed by
different SBU¶s. Strategies needs should be in align with the company objective.

6) Resources should be allocated to each SBU and broad level functional strategies. To ensure
things there would need to have co-ordination of different business of the SBU¶s.

FUN-TONAL STRATEGY: As the SBU level deals with a relatively. Smaller area that
provides objectives for a specific function in that SBU environment are marketing, finance,
production, operation etc.

7) For most companies strategies plans are made at 3 levels.

a) FUN-TONAL STRATEGY

b) SO-ETAL STRATEGY

c) OÿERATONAL STRATEGY

c c
 :

Larger -ompanies like conglometers with multiple business in different countries needs larger
level strategy.

÷
A relatively smaller company may require a strategy at a level higher than corporate level.


t¶s how the company perceives itself in its role towards the society/ even countries in terms of
vision/ mission statement/ a set of needs that strives to fulfill corporate level strategies are then
derived from the societal strategy.

[
  !c
 :

n the dynamic environment & due to the complexities of business strategies are needed to be set
at lower levels i.e. one step down the functional level, operational level strategies.

There are more specific & has a defined scope. E.g. Marketing Strategy could be subdivided into
sales Strategies for different segments & markets, pricing, distribution etc.

Some of them may be common & some unique to the target markets.

t should contribute to the functional objectives of marketing function. These are interlinked with
other strategies at functional level like those of finance, production etc

 cc [
 c [ !!

-ORÿORATE LE EL

FUN-TONAL LE EL STRTEGES
[-ORÿORATE]

SBU1 SBU2 SBU3

(SBU LE EL)

FUN-TONAL LE EL STRATEGES

OÿERATONAL LE EL

-orporate level is divided from the societal

level strategy of a corporation

S.B.U Level is put in to action under the

corporate level strategy.

Functional Strategies operate under SBU Level.

Operational Level is derived from functional level strategies

"  #

These are the levels at which strategies are formulated


 
   c
 $ %   



c
  
  

%  

ssues in Strategic Decision Making

 1.? While making a decision the company might have different people at different periods of
time.
2.? Decision requires judgments; personal related factors are important in decision-making.
Hence decision ma y differs as person change.
3.? Decisions are not taken individually, but often there is a task in decisions which could be
ndividual s Group decision making. There will be a difference between the individual
and group decision-making.
4.? On what -riteria a company should make its decision, for evaluation of the efficiency &
effectiveness of the decision making process, a company has to set its objectives which
serves as main bench mark.
5.? 3 Major -riteria in decision Making are
1.? The concept of Maximization.
2.? The concept of satisfying.
3.? The concept of incrementalism.

Based on the concept chosen the strategic decisions will differ.

1.? Generally decision-making process is logical and there will be rationality in decision-
making.
2.? When it comes to Strategic decision making point of view there would be proper
evaluation & then exercising a choice from various available alternative resources, which
leads to attain the objectives in a best possible way.
3.? -reativity in decision-making is required when there is a complete situation & the
Decision taken must be original & different.
4.? There could be variability in decision-making based on the situation & -ircumstances.


&c
  

 

Senior management plays n important role in Strategic Management.

&'
[$
 
#Board of Directors is the supreme Authority in a company. They

are the owners/ shareholders/ lenders. They are the ones who direct and responsible for the
governance of the company. The -ompany act and other laws blind them and their actions &
they sometimes do get involved in operational issues. ÿrofessionals on the B.O.D help to get new
ideas, perspectives & provide guidance. They are the link between the company and the
environment.

&"[#-hief Executive Officer is the most important Strategist and responsible for all
aspects from formulations/mplementation to review of Strategic Management. He is the leader,
motivator & Builder who forms a link between company and the board of directors and
responsible for managing the external environment and its relationship.

&[

 
#They are independent in thought and action and they set / start up a new
business. A -ompany can promote the entrepreneurial spirit and this can be internal attitude of
an organization. They provide a sense of direction and are active in implementation.
&c 
 
 #They are answerable to B.O.Directors & The -.E.O as they
would look after Strategic Management a responsible of certain areas / parts of terms.

&c'()! #They -o-ordinate with other SBU¶s & with Senior

Management. They are more focused on their product / burners line.

They are more on the implementation role.

&"

 *  c # t provides administrative support tools and techniques and
is a -o-ordinate function.

&"   # Often -onsultants may be hired for a specified new business or Expertise
even to get an unbiased opinion on the business & the Strategy.

&! 
# They form an important link in strategizing & mplementation.

They are not actively involved in formulation of Strategies and they are developed to be the
future management.

"  #These are the issues in strategic decision-making and the role in Strategic
Management.

+  c
  

 *
  


Here are few definitions of Strategic Management ÿrocess.

÷
According to Glueck it¶s a stream of decisions and actions that lead to the development of an
effective strategy/ Strategies to help achieve -orporate Strategies.


According to Hofer it¶s the process, which deals with fundamental Organisational, renewal &
growth with the development of strategies, Structures and Systems necessary to achieve such
renewal and growth and with the organizational systems needed to effectively manage the
strategy formulation and implementation process.


Ansoff defines it as ³ The Systematic approach & important responsibility of general

management to position and relate the firm to its environment in a way that will assure its
-ontinued Success and make it secure from surprises´.


Sharplin defines as the formulation & implementation of plans and -arrying out activities
related to the matters, which are vital, and of continuing importance to the total organization.


According to Harrison & St John ± Strategic Management is the process through which
organization learn from their internal & external environment, establish strategic decision create
strategies that are intended to help achieve establish goals & execute there strategies achieve
Establish goals and execute there Strategies all in an effort to satisfy key organizational stake
holders.
From the above block diagram it states that Strategic Management is a process, which leads to
the formulation of Strategy/ Set of Strategies & managing thru Organisational System for the
achievement of ision, Mission Goals and Objectives.

-ompany ision / Mission

÷
-ompany ision is What a -ompany Wishes to become or aspire to be.


-ompany Mission is what the -ompany is and why it exists


James ÿarras & James -ollins divides ision/Mission into 2 ÿarts.


"
 "
"
*


Mission Envisioned Future Audaclous Goals ivid Description

"
 # s the unchanging part of organization. t is the character of an organization, this
would not change for a longer time even it were disadvantage.

"
#what it believes in.

"
*
#Existence of Organization and that goes far behind

  , 
#Are the goals to be reached.

t is classified into:

Œ
 
# These are the goals that the company would like to achieve. They are tough
needs extraordinary commitment and effort.

$
  #-.
  
  % 
  

%  /.

c

Π: External & nternal Analysis:

1.? The External Environment is made up of all the Factors, -onditions & influences outside
the organizations.
2.? it gives rise to opportunities which can be exploited or it may give rise to threats which
can weaken / cause problem to the organization.

c c Œ
cc



c

c : it¶s always in relation to the environment. t¶s an unborn capacity, which needs to
fulfill two conditions.

1) Requirement for success.

2) t gives the Strategic Advantage.

t has strengths more than the competitor; it could gain more than the -ompetitor.

E.g. Superior research where new products & nnovations are required.

: t¶s something required for success is missing/inherent inadequacy. t gives strategic
disadvantage to the Organisation.

E.g. Over dependence on a single product line in a mature market.

 
   s developed over a period of time, using these competencies exceeding
well, it develops a fine art of -ompetition with its rules. This capacity of exercing turns them to
core competencies.

 
c  
Œ  

 

c

t means that there is a proper evaluation and exercing a choice from various alternative available
resources in such a way it may lead to the achievement of company¶s objective.

  



 

mplementation is the responsibility of -EO. He is responsible from implementation to review of

Strategic Management.

u  "
"
  c
   
 
0, 

  : for an effective strategic intent one has to develop effective strategy, rather than
focusing at the resourcefulness of -ompetition & their pace at which they are building
competencies one has to focus on existing position.

"
"
  #

÷
An organization with its resources and the capacity of converting the resources in to outputs
and the behavior of there (i.e. capability and resources) develops certain strength and weakness,
which their combined lead to synergistic effects.


Synergy ± Total (is greater) sum of the parts. n terms of organizational competencies it
manifest themselves in advantages over competition.


-ompetencies develop over a period of time.


t¶s a fine art of competing with its rivals over a period of time and it uses these competencies
to exceed well. The capability of using these competencies to exceed well turns them into core
competence.

-ore competencies have joined greater currency and popularity as per -.K ÿrahaled and Gary
Hamel. t¶s a portfolio of products/services/different business.


n short run competencies for a company is derived from the price performance and in longer
run it¶s the ability to build at lower cost and speedily than others.


A diversified company is like a large tree. What are not easily visible and apparent ± are the
core products and leaves, flowers, fruits are the end product.

Root is akin to ³-ore -ompetence´.


-ore competence is communication, collective learning and co-ordination of diverse

production skills and deep involvement and commitment to work and delivery of value across all
levels and functions.

÷
-ore competencies are the glue that binds existing business and guide market entries instead
of market attractiveness.

÷÷
-ore competencies can be identified by conducting 3 tests i.e. provides potential access to
wide variety of markets and significant contributions to the benefit of the end product difficult
for competitors to imitate.

÷
Building competencies are not sharing costs by SBU¶ (or) out pending rivals on R and D

÷
By not building competencies in emerging markets you may lose the chance of competing in
existing markets.

t¶s important to maintain the competencies even it not active in the market.

c
   is something more than the unfettered ambition. t¶s not a soft target. According
to ÿrahlad & Gray

÷
t forsee¶s a desired leadership position and establishes the criteria the organization will chart
it¶s progress.


t -aptures the essence of winning & is stable over time.


t requires personal effort, -ommitment and bit of luck to achieve the target.


The mportant thing that a company asks for is not ³How Well Next Year be different´? But
they ask, ³ What must we do differently next year to get closer to our strategic intent?´


Most companies look at change and innovations in isolation


nnovations come from everywhere & top Management role is to add value to it.

Strategic intent leaves room for creativity, innovation & top Management directs it.

There must be a balance between resources as a -onstrain s Resource as leverage so as to

reduce risk. Former is done through building a balanced portfolio of cash generating and cash
consuming business and in the latter a well balanced and sufficiently broad portfolio/ collection
of advantages is assured.


t implies a servable stretch for an organization.

÷
Since the current capabilities & resources are not]] it will force inventiveness and the
management will keep on involving challenges and they give time to digest one challenge before
launching another.

÷÷
One important parameter is reciprocal responsibility ± Which means equal blame & credit
for both operating levels & top management.

÷
-ompanies with good strategic intent know the importance of documenting failure but
instead of blame fixing and nailing people they are more interested in the management reasons
and the orthodoxy, that may have led to future.

c
 : To Achieve strategic intent one has to stretch forward and has to look at the
resourcefulness instead of looking at resources. One has to make use of nnovation and resources.
Stretch leads to leverage.

!
: Refers to concentrating on the resources to achieve strategic intent, accumulating,

learning, experiences & -ompetencies in a manner to meet the aspirations by stretching the
scarce resource that an organizational resource to the environment.

nstead of allotting the competitors blindly & taking their head companies must leverage the
resources.

, : Strategic fit is the traditional way of looking at strategy. Strategic fit is conservative and
seems to be more realistic but u may not be aware of the potential. Under stretch & leverage
Strategic extent could be impossible, idealistic but under fit strategic something far beyond
possibilities and look at the potential possibilities.

"  

Thus Strategic intent is what the organization strives for e.g. -anon wanted to beat Xerox. t¶s an
obsession to an organization & it is to win at all levels of the organization, sustaining that
obsession is in quest for global leadership.