UNIT-I

Strategic Management

Strategic Management:

Definition: Strategic management refers to the systematic planning,

implementation, monitoring, and adjustment of an organization's strategies to
achieve its long-term goals and objectives. It involves making decisions about
where an organization is headed, what actions it should take to get there, and
how it will allocate its resources to achieve its desired outcomes.

Scope: The scope of strategic management encompasses various aspects,

including:

1. Setting Objectives: Defining the organization's long-term goals and specific

objectives.

2. Environmental Analysis: Evaluating the internal and external factors that

can impact the organization.

3. Strategy Formulation: Developing strategies to achieve objectives based on

the analysis.

4. Strategy Implementation: Executing the chosen strategies throughout the

organization.

5. Strategy Monitoring: Continuously assessing progress toward goals and

making necessary adjustments.
 6. Resource Allocation: Allocating resources (human, financial, and other
assets) effectively to support strategies.

7. Organizational Culture: Creating a culture that aligns with and supports the
chosen strategies.

Importance: Strategic management is crucial for several reasons:

• Direction: It provides a clear sense of direction for the organization,

ensuring that everyone is working toward common goals.

• Competitive Advantage: It helps organizations gain a competitive edge by

identifying unique opportunities and positioning against competitors.

• Resource Allocation: It optimizes the allocation of resources, preventing

waste and inefficiency.

• Adaptability: It allows organizations to adapt to changing environments

and seize new opportunities.

• Performance Evaluation: It provides a framework for evaluating

organizational performance and making improvements.

• Sustainability: It supports long-term sustainability and growth by focusing

on the future.

Evolution of Strategic Management:

The evolution of strategic management can be traced through several stages:

1. Early Stages: In the early 20th century, management focused on efficiency

and operations, with limited consideration for long-term planning.
 2. 1950s-1960s: This period saw the emergence of formalized long-term
planning processes within organizations.

3. 1970s-1980s: Strategy formulation became more structured, with the

development of models and frameworks like SWOT analysis and portfolio
analysis.

4. 1990s-Present: Strategic management evolved further with the integration

of technology, globalization, and a greater emphasis on adaptability and
innovation.

Difference between Business Policy and Strategic Management:

While business policy and strategic management are related concepts, they differ
in scope and approach:

1. Scope:

• Business Policy: Business policy is a broader concept that

encompasses decisions and actions related to general management
practices and corporate governance.

• Strategic Management: Strategic management is a subset of

business policy that specifically focuses on the formulation and
execution of strategies to achieve long-term objectives.

2. Approach:

• Business Policy: Business policy often involves a more general and

ad-hoc approach to decision-making. It may not always involve a
systematic analysis of the external environment.
 • Strategic Management: Strategic management is a systematic and
deliberate approach to decision-making. It emphasizes in-depth
analysis of the internal and external environments and the
development of clear strategies to achieve specific objectives.

3. Timeframe:

• Business Policy: Business policy decisions can cover both short-term

and long-term issues.

• Strategic Management: Strategic management primarily focuses on

long-term planning and decisions that affect the organization's
direction over an extended period.

• In the basic model of strategic management, strategic intent is the

foundation that guides an organization's actions and decisions. It
comprises three key elements: mission, vision, and objectives.

• Mission: The mission statement defines the core purpose and reason
for an organization's existence. It answers the question, "What do we
do?" A well-crafted mission statement encapsulates the
organization's identity, values, and primary activities. It serves as a
broad guide for decision-making and aligns the organization's efforts
with its fundamental purpose.

• Vision: The vision statement outlines the organization's long-term

aspirations and goals. It answers the question, "What do we want to
become?" A compelling vision inspires and motivates stakeholders by
painting a vivid picture of the organization's desired future state. It
provides a sense of direction and a shared destination for all efforts.
• Objectives: Objectives are specific, measurable, and time-bound
goals that help translate the mission and vision into actionable steps.
Objectives are often organized hierarchically, with strategic
objectives at the top, followed by tactical and operational objectives.
These objectives provide a roadmap for achieving the organization's
vision and fulfilling its mission.

• Conceptual Framework: Policy, Strategy, and Tactics:

• In the conceptual framework of strategic management, policy,

strategy, and tactics are distinct levels of decision-making and
planning:

• Policy: Policies are broad guidelines or principles that govern

decision-making within an organization. They provide a framework
for consistent decision-making and action. Policies are relatively
stable over time and guide the development of strategies and tactics.
For example, an organization might have a policy on ethical conduct
that guides decision-making across all levels.

• Strategy: Strategies are high-level plans designed to achieve specific

objectives. They involve a set of coordinated actions and resource
allocation to address key challenges and opportunities. Strategies are
developed based on the organization's mission, vision, and policies.
They are more dynamic than policies and are adjusted in response to
changes in the external environment.

• Tactics: Tactics are specific actions and maneuvers used to

implement strategies. They are the practical steps taken at the
 operational level to execute the chosen strategy. Tactics are highly
detailed and may change frequently in response to changing
conditions. They are guided by both policies and strategies.

• Strategic Decision Making: Dimensions and Levels:

• Strategic decision-making is a complex process that occurs at various

organizational levels and across different dimensions:

• Dimensions of Strategic Decision Making:

• Scope: The scope of decisions ranges from routine operational

decisions to high-stakes strategic choices that can impact the
organization's long-term direction.

• Timeframe: Decisions may be focused on immediate concerns or

long-term planning.

• Risk: Strategic decisions often involve greater uncertainty and risk

than operational decisions.

• Resource Allocation: Strategic decisions allocate resources such as

capital, personnel, and technology.

• Levels of Strategic Decision Making:

• Corporate Level: These decisions concern the organization as a

whole, including mission, vision, portfolio management, mergers and
acquisitions, and major investments.

• Business Unit Level: Decisions at this level pertain to individual

business units or divisions within the organization. They involve
market strategies, competitive positioning, and resource allocation.
• Functional Level: Functional decisions are specific to departments or
functions (e.g., marketing, finance, operations). They focus on how
each function contributes to the achievement of strategic objectives.

• Operational Level: These decisions involve day-to-day activities and

processes that directly affect daily operations. They are more tactical
in nature.

• In summary, the basic model of strategic management encompasses

mission, vision, and objectives as guiding elements. The conceptual
framework includes policies, strategies, and tactics as different levels
of decision-making, and strategic decision-making occurs across
various dimensions and organizational levels. These components
collectively form the basis for developing and executing effective
organizational strategies.

• Strategic Budget and Audit in the Context of Strategic Management:

• Strategic Budget: A strategic budget is a financial plan that aligns an

organization's financial resources with its strategic goals and
objectives. It goes beyond traditional budgeting by linking financial
allocations directly to the strategic initiatives and priorities of the
organization. Here's how it relates to strategic management:

• Alignment with Strategy: A strategic budget ensures that financial

resources are allocated in a way that supports the achievement of
strategic objectives. It identifies the financial requirements of specific
strategic projects and initiatives.
• Resource Allocation: It helps in prioritizing and allocating resources
based on the organization's strategic priorities. This involves deciding
where to invest financial resources and where to reduce or reallocate
them.

• Performance Measurement: Strategic budgets include key

performance indicators (KPIs) tied to strategic goals. Monitoring
these KPIs helps in assessing whether the organization is making
progress toward its strategic objectives.

• Strategic Audit: A strategic audit is a comprehensive examination of

an organization's strategic management process to assess its
effectiveness in achieving strategic goals. It involves evaluating the
internal and external factors influencing the organization's strategy.
Here's how it relates to strategic management:

• Assessment of Strategy: A strategic audit assesses the quality and

appropriateness of an organization's current strategy. It examines
whether the strategy is aligned with the organization's mission,
vision, and objectives.

• Environmental Analysis: It includes a thorough analysis of the

external environment to identify opportunities and threats that could
impact the organization's strategic direction.

• Internal Analysis: A strategic audit also looks inward to assess the

organization's strengths and weaknesses. This involves evaluating the
resources, capabilities, and core competencies that can contribute to
or hinder strategic success.
• Strategy Implementation and Execution: The audit assesses how
effectively the organization is implementing and executing its
strategic plans. This includes evaluating the allocation of resources
and the performance of various departments or business units.

• Recommendations for Improvement: Based on the findings of the

audit, recommendations are made to refine or adjust the
organization's strategic management process. These
recommendations help the organization improve its strategic
decision-making and execution.

• Strategic Information System (SIS) in the Context of Strategic

Management:

• A Strategic Information System (SIS) is an information system

designed to support and shape an organization's strategic goals and
competitive positioning. It plays a crucial role in strategic
management in the following ways:

• Data Analysis: SIS provides data analysis tools and capabilities that
help organizations collect, process, and analyze data related to their
strategic goals. This data-driven approach aids in informed decision-
making.

• Competitive Intelligence: SIS can gather and analyze information

about competitors, market trends, and industry developments,
providing valuable insights for shaping and adjusting strategies.

• Performance Measurement: SIS helps in monitoring and measuring

key performance indicators (KPIs) aligned with strategic objectives.
 This real-time data allows organizations to assess their progress and
make adjustments as needed.

• Scenario Planning: SIS can model different scenarios based on

various assumptions, helping organizations evaluate the potential
outcomes of different strategic choices.

• Collaboration and Communication: SIS facilitates communication

and collaboration among different parts of the organization, ensuring
that everyone is aligned with the strategic direction.

• Risk Management: SIS can identify potential risks and vulnerabilities

that may affect the successful execution of strategic plans, enabling
proactive risk management.

• In summary, strategic budgeting, audits, and strategic information

systems are integral components of strategic management. They
help organizations align financial resources, assess strategic
effectiveness, and leverage data and technology to support strategic
decision-making and execution.