Ch 2.

Overview of Strategic Management

Process
Strategyis an action that managers take to attain
one or more of the organizations goals.
Strategy can also be defined as a general direction
set for the company and its various components to
achieve a desired state in the future.
Strategy results from the detailed planning process.
Strategy is a well defined roadmap of an
organization.
It defines the overall mission, vision and direction of
an organization.
The objective of a strategy is to maximize an
organizations strengths and to minimize the
strengths of the competitors.

Strategic Management Process

Strategic management process means defining the
organizations strategy.
It is also defined as the process by which managers
make a choice of a set of strategies for the
organization that will enable it to achieve better
performance.
Strategic management is a continuous process that
appraises the business and industries in which the
organization is involved; appraises its competitors;
and fixes goals to meet all the present and future
competitors and then reassesses each strategy.
It has four steps-Environmental Scanning, Strategy
Formulation, Strategy Implementation, Strategy
Evaluation

Strategy FormulationStrategy formulation refers to the process of

choosing the most appropriate course of action
for the realization of organizational goals and
objectives and thereby achieving the
organizational vision.
The process of strategy formulation basically
involves three main steps1. Setting Organizations objectives -The key
component of any strategy statement is to set
the
long-term
objectives
of
the
organization.Thus, strategy is a wider term
which believes in the manner of deployment of
resources so as to achieve the objectives.
Objectives are based on following-

.
.
.

.
.

a.
VisionCorporate
vision
is
a
short,
precise,
andinspiringstatement of what the organization
intends to become and to achieve at some point in
the future, often stated in competitive terms.
Vision refers to the category of intentions that are
broad, all-inclusive and forward-thinking.
It is the image that a business must have of its
goals before it sets out to reach them.
It describes aspirations for the future, without
specifying the means that will be used to achieve
those desired ends.
It may be a mental image of the possible and
desirable future state for the organization.
This image, which we call avision, may be as vague
as adream or as precise as a goal or a mission
statement.

Eg.Khaitan-Disneyland-To be happiest place on

earth, McDonalds-To be worlds best quick
service restaurant
b.MissionMission states the business reason for the
organization's existence.
It does not state an outcome.
It contains no time limit or measurement.
It provides basis for decisions on resource
allocation and appropriate objectives.
It defines current and future business in terms
of product, score, customer, reason, and market
price.
Statement of business.

Eg. Videocon has mission of enhancing quality of

life, Infosys has mission to achieve their
objectives
to
be
fair
and
honest
with
clients,employees,vendorsand society.
c. GoalsGoals are results to be achieved.
It describes ideal states to be achieved at future
time.
It is consistent with and related directly to vision
and mission.
It guides everyday decisions and actions.
Goal setting is the process of deciding what you
want to accomplish and devising a plan to achieve
the result you desire.
Eg-Financial as profit,Marketing goal for sale etc.

2.Analysing internal and external environment(SWOT)

SWOT analysis also known as internal and external
analysis stands for Strengths, Weaknesses,
Opportunities and Threats.
The SWOT analysis involves analysis of both the
internal as well as external environment.
SWOT analysis is especially important during strategic
planning wherein the organization needs to decide
thestrategywhich it has to take.
The strategic decisions can be made only when the
organization knows everything about itself as well as
where it stands in the market.
The four factors of SWOT analysis combine to give
excellent information to the company such that the
company can proceed to decision making once it knows
its strengths, weaknesses, opportunities and threats.

1. External environmentOpportunities Informs of the opportunities

available to the company to increase business
and get further customers
Threats Determines the major threats for the
company, whether they be in internal
environment or external.
2. Internal environmentStrengths Gives confidence about factors
which the company got right and which it can
capitalize on.
Weaknesses Shows the major weaknesses
within a company which the company needs to
work on

3.Strategy Making Strategy Making means involving and linking all

important decisions to form strategies.
Modes of strategic managementare the actual kinds
of approaches taken by managers in formulating and
implementing strategies.
They address the issues of who has the major
influence in the strategic management process and
how the process is carried out.
It happens in three stagesa. Entrepreneurial Mode
Entrepreneurial mode is an approach in which
strategy is formulated mainly by a strong visionary
chief executive who actively searches for new
opportunities, is heavily oriented toward growth, and
is willing to make bold strategies rapidly.

 The entrepreneurial searches for new mode are found

in organizations that are young or small, have a strong
leader who are creative thinker.
b. Adaptive Mode
Adaptive Mode covers long and short termstrategy
linked.
Stagein a firm'sdevelopmentwherelongtermstrategic decisionsare closely linked to itsshorttermstrategy.
Adaptive mode is an approach to strategy formulation
that emphasizes taking small incremental steps,
reacting to problems rather than seeking
opportunities.
It aims at making strategies in business areas where
organization do not want to take risk.

3. Planning Mode
Planning mode is an approach to strategy
formulation that involves systematic,
comprehensive analysis, along with integration
of various decisions and strategies.
With the planning mode, executives often
utilize planning specialists to help with the
strategic management process.
The ultimate aim of the planning mode is to
understand the environment well enough to
influence it.
The planning mode is most likely to be used in
large organizations that have enough resources
to conduct comprehensive analysis.

Types of Strategies Companies use strategies as a means to grow their

business. There are three types of strategies1. Corporate Strategy
Long-term corporate strategies are often clarified in
a companys mission statement
Corporate strategy is often held by very large
businesses and corporations.
Corporate strategy is primarily about the choice of
direction for the firm as a whole.
In a large multi-business company, however,
corporate strategy is also about managing various
product lines and business units for maximum value.

 Corporate headquarters play the role of

organizational parent in that and deal with
various product and business unit children.
Even though each product line or business unit
has its own competitive or cooperative strategy
that it uses to obtain its own competitive
advantage in the marketplace, the corporation
coordinate these different business strategies so
that the corporation as a whole succeeds as a
family.
Eg.-Tata Group has different types of business
like Constancy, automobile, hotels etc.
Corporate whole is greater than the some of its
individual business unit parts.

 Corporate Strategy are of different types as per

requirements its utilisation likea.Growth Strategy For growth and
development
b.Stability Strategy _Market growth
c. Directional Strategy_ Guidance for different
jobs
d.Defensive Strategy_For restructure of business
2. Business strategy
These strategies focus on competitive positioning
(where to compete and how) in order to create an
advantage over competitors.
Business managers should run the business in a
way that is in alignment with overall corporate
strategy.

 The framework for building a business strategy

includes developing the mission of the business,
once again conducting an environmental scan
and examining the key activities of the value
chain.
The action plan that results directs the business
strategy, programs and budget.
3. Functional strategies This kind of strategy is concerned withmaking
improvements to business functions that support
business and corporate strategy.
Functional strategy include IT strategy, marketing
strategy, human resources strategy, and other
operations.

 Functional-level strategy is the foundation

that supports both corporate-level strategy
and business strategy.
At the ground level, the functional strategies
of Finance, HR, IT and Marketing carry out the
objectives and mission set at the corporate
and business strategy levels.

Analyzing and choosing the right strategies

1.Strategic Analysis- is the process of conducting
research on the business environment within which
an organisation operates and on the organisation
itself, in order to formulate strategy.
It is a way of investigation of the objective factors
being considered in the process of strategic choice.
Certain questions like which product, which
business ,how to start, where to start etc get
answers from strategy analysis.
In this new tools and techniques are regularly used
for replacing some old techniques.
Its main theme is competition is market.
It is used for both corporate and business level
strategies.

2. choosing the right strategies- Business strategy

will be the overall strategy that is used to
shape and run the business.
It may incorporate a number of smaller
missions, goals that set out what you want to
achieve with your business.
These may relate to business focus, the
differentiation of business from its competitors,
or the other factors that will determine what
makes business a success.
It is the decision to select from all available
alternatives strategies considered best to meet
organisations objectives.
It is a decision making process.

 It has four steps A. Focusing on Strategic Alternativesidentification of different alternatives and

best favorable will be selected.
B. Considering the selection FactorsSubjective and objective both
C. Evaluavation of Strategic Alternative-Each
strategy has to be evaluated on the basis of
its capability to help organisation.
D. Making the Strategic choice-Final step to
select one or more Strategy for
implementation.