STRATEGIC

MANAGEMENT - I

Session 1
The Concept of Strategy

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STRATEGY
STRATEGY is the
 long-term
 direction and scope
 of an organisation
 to achieve advantages
 by using its resources
 in a changing environment.

In general, there is no higher-level statement of an

organisation’s objectives.
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THREE PARTS OF SM
There are three parts of STRATEGIC
MANAGEMENT function:
Formulation of strategy
Implementation of strategy: managing the
organisation
Managing the implementation and
formulation in a changing environment:
managing strategy itself

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STRATEGIC vs. OPERATIONAL
MANAGEMENT
STRATEGIC OPERATIONAL
MANAGEMENT MANAGEMENT
♦ Ambiguous/ uncertain ♦ Routinised
♦ Complex ♦ Operationally specific
♦ Organisation-wide ♦ Short-term
♦ Fundamental implications
♦ Long-term
implications

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LONG-TERM
All decisions about the long term are
STRATEGIC DECISIONS, because they
address issues other than those addressed by
OPERATING or TACTICAL decisions,
and require different tools for taking these
decisions.

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DIRECTION AND SCOPE

The strategy statement gives the direction that

the organisation is to pursue.

It also defines the scope of operations.

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ORGANISATION

 The nature of the organisation.

 The values and beliefs of the people in
command/ stakeholders.
 The SWOT analysis
 The PESTEL framework analysis

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ADVANTAGES
This is the “Strategic intent” – why the
organisation wants to pursue a strategy,
based on the SWOT and PESTEL analysis.

It could be for a specific advantage, or to

ward off a disastrous threat.

It could be for Survival, Profits or Growth

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RESOURCES
 Matching of the resources and activities of
an organisation to the environment:
This is the “strategic fit”
 Building on or stretching an organisation’s
resources to create opportunities or to
capitalise on them.
This is the “resource-led stretch”

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RESOURCES -II
ASPECT OF “FIT” “STRETCH”
STRATEGY
Underlying Fit between Leverage
basis market and resources to
org. improve VFM
Advantage Proper Creating
through direction of competence
resources or market
need

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RESOURCES - III
ASPECT OF “FIT” “STRETCH”
STRATEGY
Small players Find and Change the
survival defend a niche rules of the
game
Risk reduction Portfolio of Portfolio of
by products/ competences
businesses
Corporate Strategies of Core
investment in business units competences

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ENVIRONMENT
♦ Ever-changing

♦ The PESTEL framework

♦ The FIVE FORCES model

♦ Uncertain and ambiguous

♦ Complex in nature

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BENEFITS OF THE
STRATEGIC APPROACH - I

♦ Providing better guidance to the entire

organisation about “what is it that we are
trying to do”
♦ Making everyone more alert to new
opportunities and threats

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BENEFITS OF THE
STRATEGIC APPROACH - II

♦ Unify the organisation

♦ More proactive management posture
♦ Constantly, automatically developing
organisation
♦ Provide a basis for evaluating budget
proposals

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VOCABULARY OF STRATEGY
♦ VISION: the desired future state – also
called the Strategic Intent
♦ MISSION: what the organisation will do to
achieve its basic purpose
♦ GOAL: general and simple statement of aim
or purpose
♦ OBJECTIVE: more precise statement of
goal, quantified when possible

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 VOCABULARY OF
STRATEGY- II
♦ BUSINESS UNIT STRATEGY: it is about
how to compete successfully in particular
markets
♦ STRATEGIC BUSINESS UNIT: is a part
of an organisation for which there is a
distinct external market for goods or
services that is different from another SBU

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PATTERNS OF STRATEGY - I
♦ To outcompete rivals
♦ Respond to external changes
♦ To alter geographic coverage
♦ To merge/ acquire a rival
♦ To form strategic alliances/ collaborations
♦ To capitalise on new opportunities
♦ To defend against new threats

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PATTERNS OF STRATEGY - II
♦ To define how the company manages R&D,
production, sales and marketing, finance,
and other key functions
♦ To strengthen resource base and
competitive capabilities
♦ Related/ unrelated diversification

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 ELEMENTS OF STRATEGIC
MANAGEMENT
♦ Strategic intent
♦ Strategic choices
♦ Analysis STRATEGY!
♦ Implementation design
♦ Evaluation design
♦ “GO!”
♦ Monitor and control

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 APROACHES TO
STRATEGY-MAKING
♦ Design – the range of influences on an
organisation’s performance can be best
understood by analysis
♦ Experience – how an organisation performs
depends mostly on what experience it has
built up, even in new areas of operations
♦ Ideas – order and innovation emerge from
the variety and diversity in and around the
organisation.

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 APPROACHES TO
FORMULATION
♦ The Chief Architect approach – one person takes
the full charge of the vision
♦ The Delegation approach – the manager in charge
delegates big parts of the work to trusted
subordinates and teams
♦ The Collaborative or Team approach – a strategy
team is put in charge of evolving strategy
♦ The Corporate Intrapreneur approach –
encourage individuals and teams to come up with
new initiatives and approaches

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 TEST OF A GOOD STRATEGY
A good strategy must fulfill:
♦ Competitive Advantage Test: it must provide a
sustainable competitive advantage
♦ Performance Test: it must boost company
performance: gains in profitability, and in
competitive strength
♦ Goodness of Fit Test:The best fit to the external
and internal situation of a company

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