STRATEGIC MANAGEMENT

Mudit Tomar
Asst. Prof.
JEMTEC
 Strategic Intent is the leveraging of a firm’s internal
resources, capabilities and core competencies to
accomplish the firm’s vision, mission and objectives in
a competitive environment. Hierarchy of strategic
intent includes the following:
 A broad VISION of what organization wants to
become
 The organization’s MISSION
 The Strategic objectives and specific goals to be
pursued relentlessly
 The plans that are developed to accomplish the
intentions of management in a concrete way
Most Integrative Vision
Fewest in No.

Mission

Goals

Objectives

Most Specific. Highest in No.

Plans
 Vision is vividly descriptive image of what a
company wants to become or wants to be
known for.
 Vision is a combination of 3 basic elements:
 An organization’s fundamental reason for
existence.
 It’s time less.
 Huge and audacious aspirations for future.
 Vision provides direction and helps the organisation prepare
for the future.
 Vision provides guidance for decision-making.
 Vision shapes the organisation’s strategy.
 Vision guides the types of people an organization must hire
and promote.
 Vision defines what an organization will and will not do.
 Vision helps set priorities and guides planning.
 Vision aligns people and activities across the organisation.
 Vision provides purpose and a source of inspiration.
 Vision reflects an organisation’s core values and beliefs.
 Vision empowers people and helps focus their efforts.
 Vision brings change and hope for the future.
 According to Thompson ‘Mission reflects the
essential purpose of the organization,
concerning particularly why it is in existence,
the nature of the business (es) it is in, and the
customers it seeks to serve and satisfy.
 The mission is an enduring statement of
purpose that distinguishes one business from
other similar firms.
 Customers: Who are firm’s customers?
 Product or Service
 Markets: Geographically, where does the firm
compete?
 Technology
 Concern for survival, growth and profitability
 Philosophy
 Self-concept
 Concern for public image
 Concern for employees
 Avon
"To be the company that best understands and satisfies the product,
service, and self-fulfillment needs of women—globally."
Amazon
"To be earth's most customer-centric company; to build a place where
people can come to find and discover anything they might want to buy
online."
Harley Davidson
"To fulfill dreams through the experiences of motorcycling."
Starbucks
"To share great coffee with our friends and help make the world a little
better.“
Hilton
"To fill the earth with the light and warmth of hospitality."
 Morgan Stanley
Connecting people, ideas and capital, we will be
our clients’ first choice for achieving their
financial aspirations.
Pfizer
To become the world’s most valued company to
patients, customers, colleagues, investors,
business partners and the communities where
we work and live.
Southwest Airlines
To become the World’s Most Loved, Most Flown,
and Most Profitable Airline.
 Organizations are open systems and they get
affected by the individuals and parties within
and outside.
 In order to survive and flourish in a highly
competitive and turbulent environment,
every organization must strike a happy
balance between environment, values and
resources of the organization.
The environment of a business is the ‘aggregate of
conditions, events and influences that surround
and affect it’.
 Political Factors: Political Ideology,
protectionism, entry barriers, political
stability, Approach towards growth
development and market structure etc.
 Economic Factors: General Availability of
credit, GDP, Balance of Payment, Level of
disposable income, Propensity of people to
spend, Interest Rates, Inflation Rates,
Unemployment rates, Sectoral growth rate
 Socio-cultural Factors: Buying and
consumption patterns, Ethical standards,
family structure, values and beliefs etc.
 Technological Factors: Technology
prevailing, technology being used by the
co0mpetitors, technology diffusion rate etc.
These factors can affect cost of production,
profit margins, time required, quality level
significantly.
 Legal Factors: Consumer law, Discrimination
law, Copyright law, Health and Safety law,
Employment law, Fraud law, Import/Export
law etc.
 Demographic Factors: Population, Age
Distribution, religious composition, literacy
levels, inter-state migration, rural urban
mobility, income distribution etc.
 Complex
 Dynamic
 Uncertain
 Turbulent
 Degree of Turbulence
-Changeability
-Predictability
 It is a process to identify all the external and
internal elements, which can affect the
organization's performance and ultimately
will affect the firm’s ability to achieve the
desired objectives.
 Holistic Exercise: EA takes a holistic, broad
view of the environment instead of scanning
in a piecemeal fashion.
 Exploratory process: EA tries to explore the
unknown terrain, putting emphasis on what
could happen.
 Continuous Activity: EA is a continuous
process of picking up new signals from the
environment and keeping track of shifts in
the overall pattern of trends.
 Organizational Aspects: Structure, communication network, record
of success, hierarchy of objectives, policies, procedures, rules and
ability of the management team.
 Marketing Aspect: Market Segmentation, Product Strategy, Pricing
Strategy, Promotion Strategy, Distribution strategy etc.
 Financial Aspects: Liquidity, Profitability, Investment patterns
 Personnel Aspects: Labor relations, recruitment practices, training
programs, performance appraisal systems, incentive systems,
turnover and absenteeism.
 Production Aspects: Plant facility layout, R & D, Use of technology,
purchase of raw material, inventory control and use of
subcontracting/ outsourcing etc.
 Managerial Aspect: Management style, management competence,
managerial values and norms
 Strengths: Internal attributes and resources that support a
successful outcome.
 Weaknesses: Internal attributes and resources that work against a
successful outcome.
 Opportunities: External factors that the entity can capitalize on or
use to its advantage.
 Threats: External factors that could jeopardize the entity's success.
 SWOT analysis is often used at the start of or as part
of a strategic planning exercise.
 The framework is considered a powerful support for
decision-making because it enables an entity to
uncover opportunities for success that were
previously unarticulated or to highlight threats before
they become overly burdensome.
 For example, this exercise can identify a market niche
in which a business has a competitive advantage or
help individuals plot career success by pinpointing a
path that maximizes their strengths while alerting
them to threats that can thwart achievement.
 ETOP Analysis: It is an acronym for
EnvironmentalThreat and Opportunity Profile.
 The preparation of ETOP includes dividing the
environment into different sectors (Marketing,
Technological etc.) and then analyzing the
impact of each sector on the organization.
 It helps the manager to understand what all
opportunities environment is having and what
all threats the organization might have to face.
 List major environmental factors such as
political, socio-cultural etc.
 Environmental factors are then further
subdivided into subsectors of each factor.
 These factors are then analyzed to determine
major weaknesses and strengths in each
subsectors
 The impact of each factor is then assessed as
being either favorable, unfavorable or
neutral.
1. Issue Selection:
Focus on issues, which have been selected, should not be missed since there is a
likelihood of arriving at incorrect priorities. Some of the impotent issues may be
those related to market share, competitive pricing, customer preferences,
technological changes, economic policies, competitive trends, etc.
2. Accuracy of Data:
Data should be collected from good sources otherwise the entire process of
environmental scanning may go waste. The relevance, importance,
manageability, variability and low cost of data are some of the important factors,
Which must be kept in focus.
3. Impact Studies:
Impact studies should be conducted focusing on the various opportunities and
threats and the critical issues selected. It may include study of probable effects
on the company’s strengths and weaknesses, operating and remote
environment, competitive position, accomplishment of mission and vision etc.
Efforts should be taken to make assessments more objective wherever possible.
4. Flexibility in Operations:
There are number of uncertainties exist in a business situation and so a company
can be greatly benefited buy devising proactive and flexible strategies in their
plans, structures, strategy etc. The optimum level of flexibility should be
maintained.
 All organisations operate in the external environment
which is dynamic and uncertain. As this environment
contains factors which affect business operations,
plans should be made keeping into account the
impact of these factors on business.
 The behavior of these factors keeps changing as they
operate in the dynamic environment and, therefore, it
has to be protected through forecasts.
 Plans should forecast events for efficient working of
the organisation. Organisations should analyze the
environment through various techniques of
forecasting, identify their strengths and weaknesses
and formulate the plans.
 Time-Series Analysis:
This technique forecasts future demand based on what has
happened in the past. The basic idea of time-series analysis is to fit
a trend line to past data and then to extrapolate this trend line into
the future.
Sophisticated mathematical procedures are used to derive this
trend line and to identify and seasonal or cyclical fluctuations.
Usually a computer program is used to do the calculations
required by a time-series analysis.
One advantage of this technique is that it is based on something
other than opinion. This method works best when a significant
amount of historical data is available and when the environmental
forces are relatively stable. The disadvantage is that the future
may not be like the past.
 Regression Modeling:
Regression modeling is a mathematical forecasting
technique in which an equation with one or more input
variables is derived to predict another variable. The
variable being predicted is called the dependent variable.
The input variables used to predict the dependent variable
are called independent variables.
The general idea of regression modeling is not determine
how changes in the independent variables affect the
dependent variable. Once the mathematical relationship
between the independent variables and the dependent
variable has been determined, future values for the
dependent variable can be forecast based on known or
predicted values of the independent variables.
 Delphi Technique:
The Delphi technique is a method for developing a consensus of
expert opinion. Under this method, a panel of experts is chosen to
study a particular question. The panel members do not meet as a
group and may not even know each other’s identity. Panel
members are then asked (usually by mailed questionnaire) to give
their opinions about certain future events or forecasts.
After the first round of opinions has been collected, the
coordinator summarizes the opinions and sends this information
to the panel members. Based on this information, panel members
rethink their earlier responses and make a second forecast.
This same procedure continues until a consensus is reached or
until the responses do not change appreciably. The Delphi
technique is relatively inexpensive and moderately complex.
 Expert opinion method:
In these environment forecasting is based on an opinion of
outside experts, enthusiast or specialist. The experts have
much more well knowledge about market conditions and
customer taste and preferences. Although this method is
similar to executive judgment method. However, it
requires external experts.
 Executive Opinion:
With this method, several managers get together and
devise a forecast based on their pooled opinions.
Advantages of this method are simplicity and low cost.
The major disadvantage is that the forecast is not
necessarily based on facts.
 Scenario building:
Scenario building is a method that aids decision-makers by providing a
context for assessing, planning and programming, lowering the level of
uncertainty and raising the level of knowledge in relation to the
consequences of actions which have been taken or are going to be taken,
in the present. Scenarios are the composite pictures of possible future.
They are built on the basis of time ordered sequence of events that have
logical and reasonable cause and effect interpersonal relationship with
each other resulting forecast based on good interrelationships among
the events. Scenarios are built to address future contingencies.
The prime aim of scenarios and scenario building is to enable decision-
makers to detect and explore all, or as many as possible, alternative
futures so as to clarify present actions and subsequent consequences.
They should, thus, be prevented from making strategic decisions before
they have done some strategic thinking.
 For the firm to make profit, it must create
value for the buyers
 To create values it’ll have to obtain goods and
services from its suppliers and hence it must
value them too
 While creating value for the customers it
must also look at the rivals( Competitors)
who are there in the arena and are targeting
same customers.
Is exploration of a company’s
 Competencies
 Cost position
 Competitive viability
 A value chain is the full range of activities – including
design, production, marketing and distribution –
businesses conduct to bring a product or service from
conception to delivery. For companies that produce
goods, the value chain starts with the raw materials
used to make their products, and consists of
everything added before the product is sold to
consumers.
 Value chain management is the process of organizing
these activities in order to properly analyze them. The
goal is to establish communication between the
leaders of each stage to ensure the product is placed
in the customers'
 Harvard Business School's Michael E. Porter was the first
to introduce the concept of a value chain. Porter, who also
developed the Five Forces Model to show businesses
where they rank in competition in the current
marketplace, discussed the value chain concept in his
book "Competitive Advantage: Creating and Sustaining
Superior Performance" (Free Press, 1998).
 "Competitive advantage cannot be understood by looking
at a firm as a whole," Porter wrote. "It stems from the
many discrete activities a firm performs in designing,
producing, marketing, delivering and supporting its
product. Each of these activities can contribute to a firm's
relative cost position and create a basis for
differentiation."
 Inbound logistics are the receiving, storing and distributing of raw
materials used in the production process.
 Operations is the stage at which the raw materials are turned into
the final product.
 Outbound logistics are the distribution of the final product to
consumers.
 Marketing and sales involve advertising, promotions, sales-force
organization, distribution channels, pricing and managing the final
product to ensure it is targeted to the appropriate consumer
groups.
 Service refers to the activities needed to maintain the product's
performance after it has been produced, including installation,
training, maintenance, repair, warranty and after-sale services.
 Procurement is how the raw materials for the product
are obtained.
 Technology development can be used in the research
and development stage, in how new products are
developed and designed, and in process automation.
 Human resource management includes the activities
involved in hiring and retaining the proper employees
to help design, build and market the product.
 Firm infrastructure refers to an organization's
structure and its management, planning, accounting,
finance and quality-control mechanisms.
 Cost advantage: After identifying the primary and support activities,
businesses should identify the cost drivers for each activity. For a more
labor-intensive activity, cost drivers could include how fast work is
completed, work hours, wage rates, etc.
Businesses should then identify links between activities, knowing that if
costs are reduced in one area, they can be reduced in another. Businesses
can then identify opportunities to reduce costs.
 Differentiation advantage: Identifying the activities that create the
most value to customers is the priority. These can include using relative
marketing strategies, knowing about products and systems, answering
phones faster, and meeting customer expectations.
The next step is evaluating these strategies to improve the value.
Focusing on customer service, increasing options to customize products
or services, offering incentives, and adding product features are some of
the ways to improve activity value. Lastly, businesses should identify
differentiation that can be maintained and adds the most value.
 Activities that differentiates the product.
 Activities that lowers the cost.
 Activities that meet the customer’s need
quickly.
 Identify activities
 Allocate costs
 Identify activities that differentiates the firm
 Examine the value chain.
 Which activities are most crucial in reducing
costs or adding value?
 What are the key cost and value drivers?
 What linkages help to reduce cost, enhance
value or discourage imitation (hence
maintaining competitive advantage)?
 How do these linkages relate to the cost and
value drivers?
 "If a company can create an advantage ...
through a value chain analysis, it captures a
competitive advantage and increases its
overall profit,“
 "To capture a competitive advantage, a
company maps out its specific activities
within the five generic value chain activities
and looks for ways to create efficiencies."