BA6CRT29 STRATEGIC MANAGEMENT

MODULE I
Introduction to Strategic Management, Concept of Corporate Strategy, Strategic
Management Process, The 7-S Framework, Corporate Policy and Planning in India.
MODULE II
Environmental Scanning, Industry Analysis, The synthesis of External
Factors, External Factors Analysis Summary (EFAS), Internal Scanning,
Value Chain Analysis, Synthesis of Internal Factors, Internal Factors Analysis
Summary (IFAS)
MODULE III
Strategy Formulation, Strategic Factors Analysis Summary (SFAS), Business
Strategy, Corporate Strategy, Functional Strategy, Strategic Choice.
MODULE IV
Strategy Implementation, Organization Structure, Corporate Culture, Diversification,
Mergers and Acquisitions, Turnaround strategies, Portfolio strategy (concepts only)
MODULE V
Evaluation and control of strategies-strategic control-standard-benchmarking-cost
benefit analysis-performance gap analysis-responsibility centres.
Other Strategic Issues, Small and Medium Enterprises, Non- Profit Organizations.
A strategy is an action plan built to achieve a specific
goal or set of goals within a definite time, while
operating in an organizational framework.

According to Rajiv Nag, Donald Hambrick & Ming-Jer

Chen, “Strategic management is the process of building
capabilities that allow a firm to create value for
customers, shareholders, and society while operating in
competitive markets.”
The process of strategic management entails −
Specifically pointing out the firm's mission, vision, and
objectives
Developing the policies and plans to achieve the set
objectives
Allocating the resources for implementing these policies
and plans
Meaning of Strategy:
The term strategy has been derived from Greek
word “Strategies” which means general. So, the
word strategy means the art of general.
A strategy is a plan of action designed to achieve a
specific goal or series of goals within an
organizational framework. Strategy is the blueprint
of decisions in an organization.

Candler defined strategy as “the determination of

basic long-term goals and objectives of an
enterprise, and the adoption of course of action
and the allocation of resources necessary for
carrying out these goals.”
Features of Strategy:

1. Strategy is a dynamic or relative concept as it is

designed to meet the demands of a particular situation.
Every situation requires a different strategy. Strategies
may have to be revised frequently because of changes in
the situation.

2. Strategies are a complex plan encompassing other

plans in order to achieve organisational objectives.

3. Strategy is forward looking: It has to do orientation

towards the future. Strategic action is required in a new
situation. It may take advantages of the past analysis.
4. Strategy provides the direction in which human and
physical resources will be allocated and deployed for
achieving organisational goals in the face of
environmental pressure and constraints.

5. Strategy is the right combination of factors both

external (opportunities and threats) and
internal(strength and weakness).

6. Strategy may involve even contradictory action. Since,

strategic action depends on environmental variables, a
manager may take an action today and may revise or
reverse his steps tomorrow depending on the situation.
Introduction to Strategic Management: Meaning & Basic
Concepts
Basic Concept of Strategy Management

Strategic management is the concept of identification,

implementation, and management of the strategies that
managers carry out to achieve the goals and objectives of their
organization. It can also be defined as a bundle of decisions
that a manager has to undertake which directly contributes to
the firm’s performance. The manager responsible for Strategic
management must have a thorough knowledge of the internal
and external organizational environment to make the right
decisions.
The Basic Concept of Strategy Management Includes:

Strategy Management – Definition

Components of Strategy Management
Process of Strategy Management

Let’s start with the definition of Strategy Management

Strategy Management – Definition

The basic concept of strategic management consists of a continuous
process of planning, monitoring, analysing and assessing everything
that is necessary for an organization to meet its goals and objectives.
In simple words, it is a management technique used to prepare the
organization for the unforeseeable future. Strategy management helps
create a vision for an organization that helps to identify both
predictable as well as unpredictable contingencies. It involves
formulating and implementing appropriate strategies so the
organization can attain sustainable competitive advantage.
What Is Strategic Management?
Strategic management is the management of an
organization’s resources to achieve its goals and objectives.
Strategic management involves setting objectives, analyzing
the competitive environment, analyzing the internal
organization, evaluating strategies, and ensuring that
management rolls out the strategies across the organization.
2. Components of Strategy Management

Strategic Intent/ Purpose

Strategic Intent of an organization clarifies the purpose of its existence and why it will continue to exist. It helps
paint a picture of what an organization should immediately do to achieve the company’s vision.

Mission
Mission component of strategy management states the role by which an organization intends to serve its
stakeholders. It describes why an organization is operating that helps provide a framework within which the
strategies to achieve its goals are formulated.

Vision
The visual component of strategy management helps identify where the organization intends to be in the future. It
describes the stakeholder dreams and aspirations for the organization.

Goals and Objectives

Goals help specify in particular what must be done in order to attain an organization’s mission or vision. Goals
make the mission component of strategy management more prominent.
The strategic management process includes 7 steps:

Setting the Goal – The first and foremost stage in the process of strategic management requires the
organization to set the short term and long term goals it wants to achieve.
Initial Assesment – The second stages says to gathers as much data and information as possible to help
state the mission and vision of the organization.
Situation Analysis – It refers to the process of collecting, scrutinizing and providing information for
strategic purposes. It helps in analyzing the internal and external environment that is influencing an
organization.
Strategy Formulation – Strategy formulation is the process of deciding the best course of action to be
taken in order to achieve the goals and objectives of the organization.
Strategy Implementation – Executing the formulated strategy in such a way that it successfully creates a
competitive advantage for the company. In simple words, putting the chosen plan into action.
Strategy Monitoring – Strategy Monitoring involves the key evaluation strategies like taking into account
the internal and external factors that are the root of the present strategies and measuring the team
performance.
SWOT Analysis – It helps in determining the Strengths, Weaknesses, Opportunities and Threats (SWOT)
of an organization and taking remedial/corrective courses of actions to fight these weaknesses and
threats.
Strategic Management Process -
The strategic management process means defining the organization’s 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 it’s competitors; and fixes goals to meet all
the present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps

1)Environmental Scanning- Environmental scanning refers to a
process of collecting, scrutinizing and providing information for
strategic purposes. It helps in analyzing the internal and external
factors influencing an organization. After executing the
environmental analysis process, management should evaluate it on a
continuous basis and strive to improve it.

2)Strategy Formulation- Strategy formulation is the process of

deciding best course of action for accomplishing organizational
objectives and hence achieving organizational purpose. After
conducting environment scanning, managers formulate corporate,
business and functional strategies.
3)Strategy Implementation- Strategy implementation
implies putting the organization’s chosen strategy into
action. Strategy implementation includes designing the
organization’s structure, distributing resources,
developing decision making process, and managing
human resources.

Strategy evaluation – It is the final step of strategy

management process. The key strategy evaluation
activities are: appraising internal and external factors
that are the root of present strategies, measuring
performance, and taking remedial / corrective actions.
Evaluation makes sure that the organizational strategy as
well as it’s implementation meets the organizational
objectives.
These components are steps that are carried, in chronological
order, when creating a new strategic management plan.
Present businesses that have already created a strategic
management plan will revert to these steps as per the
situation’s requirement, so as to make essential changes.
Strategic management is an ongoing process. Therefore, it must
be realized that each component interacts with the other
components .
McKinsey 7s Model

McKinsey 7s model was developed in 1980s by McKinsey

consultants Tom Peters, Robert Waterman and Julien Philips . It is
one of the most popular strategic planning tools. The goal of the
model was to show how 7 elements of the company: Structure,
Strategy, Skills, Staff, Style, Systems, and Shared values, can be
aligned together to achieve effectiveness in a company. The key
point of the model is that all the seven areas are interconnected
and a change in one area requires change in the rest of a firm for
it to function effectively.

Below you can find the McKinsey model, which represents the
connections between seven areas and divides them into ‘Soft Ss’
and ‘Hard Ss’. The shape of the model emphasizes
interconnectedness of the elements.
7s factors
In McKinsey model, the seven areas of organization are
divided into the ‘soft’ and ‘hard’ areas. Strategy, structure and
systems are hard elements that are much easier to identify
and manage when compared to soft elements. On the other
hand, soft areas, although harder to manage, are the
foundation of the organization and are more likely to create the
sustained competitive advantage.
 7s factors

Hard S Soft S
• Strategy • Style
• Structure • Staff
• Systems • Skills
• Shared Values
Strategy is a plan developed by a firm to achieve
sustained competitive advantage and successfully
compete in the market.

Structure represents the way business divisions and units

are organized and includes the information of who is
accountable to whom. In other words, structure is the
organizational chart of the firm. It is also one of the most
visible and easy to change elements of the framework.

Systems are the processes and procedures of the

company, which reveal business’ daily activities and how
decisions are made. Systems are the area of the firm that
determines how business is done and it should be the
main focus for managers during organizational change.
Skills are the abilities that firm’s employees perform very well.
They also include capabilities and competences. During
organizational change, the question often arises of what skills
the company will really need to reinforce its new strategy or
new structure.

Staff element is concerned with what type and how many

employees an organization will need and how they will be
recruited, trained, motivated and rewarded.

Style represents the way the company is managed by top-level

managers, how they interact, what actions do they take etc. In
other words, it is the management style of company’s leaders.

Shared Values are at the core of McKinsey 7s model. They are

the norms and standards that guide employee behavior and
company actions and thus, are the foundation of every
organization.
Corporate Planning – Definitions
Corporate planning is a sophisticated planning tool. It
has been introduced into the corporate world recently,
first in USA and later in all advanced industrial countries.
A humble beginning has been made in India also. For
example, BHEL practices corporate planning vigorously.
In simple words, corporate planning is the determination
of the long-term goals of a company as a whole and then
developing plans to achieve these goals giving due
weightage to environmental changes. It is planning for
overall organisational performance.
In the words of Steiner, “Corporate planning is the process of
determining the major objectives of an organisation and the
policies and strategies that will govern the acquisition, use and
disposition of resources to achieve these objectives.”

Hussey defines corporate planning as, “the formal process of

developing objectives for the corporation and its component
parts, evolving alternative strategies to achieve these and doing
this against a background of systematic appraisal of internal
strengths and weaknesses and external environmental changes,
the process of translating strategy into detailed operational
plans and seeing that these plans are carried out.”
Corporate Planning – Top 6 Characteristics

1. Corporate planning is a formal and systematic process.

2. It is a rational process. It requires imagination, foresight,

reflective thinking, judgement and other mental facilities.

3. Corporate planning is a continuous process. It is a dynamic

exercise that goes on throughout the company’s life.

4. Corporate planning has a long-term perspective.

5. Corporate planning provides an integrated framework within

which each of the functional and departmental plans are tied
together.

6. Corporate planning is basically concerned with the future

impact of present decisions.
Corporate Planning – Factors for the Success of Corporate Planning /
Determinants of Corporate Planning
Success of the corporate planning will depend on the following factors:

1. Proper understanding of Corporate Planning philosophy by all the

people operating at different levels in the organisation.

2. The Chief Executive is fully committed to the philosophy of Corporate

Planning.

3. The Chief Executive has to ensure the support and cooperation of all
the persons operat-ing at different levels in the organisation.

4. Linkage between the short term and long term plans and between the
corporate and the divisional plans.

5. An effective Management Information System within the organisation.

6. Existence of an effective Research & Development (R&D)
wing which is fully equipped with men and material to
engage itself in the R&D activity relating to technology,
marketing, human resources and such other areas which
may provide support to evolv-ing and executing an
appropriate strategy.

7. Corporate planning, to be rational and meaningful,

requires involvement of people operating at different levels.
The Corporate Manager has to motivate them to participate
and contribute in the exercise of corporate planning

8. An effective system of monitoring and controlling ought

to be evolved inorder to review the functioning of each
department . Every deviation need to be rectified by taking
immediately corrective measures.
Corporate Planning – 5 Major Steps
There are five major steps in corporate planning:
Step # 1. Environmental Scanning:
(a) External Environment:
Business environment is scanned to secure up-to-date information on
opportunities and threats revealed by the changing environmental forces, such
as customers, customer needs, competition, economic, social and political
climate, ecology, and technology.

(b) Internal Environment:

Marketers must also have adequate knowledge of internal situation through
self-analysis, i.e., on corporate strength and weakness.
The internal and external environmental scanning offer us SWOT, i.e., Strengths
and Weaknesses as well as Opportunities and Threats. Threats are considered
as challenges to be met or overcome by strategic planning. Marketing
information and research enables us to scan external environment. Sales audit
and cost analysis enable us to study internal environment.
Step # 2. Defining Corporate Mission:
The statement of basic purpose or mission offers customer-
oriented answers to a few questions, e.g., what is our business?
Who is our customer? What is our goal? The mission focuses the
attention on the fundamental customer needs.

Examples of Mission- What is our business?

i. Communication Co. We offer varied forms of reliable, efficient,

cost-effective services in telecommunications.

ii. Levi Strauss- In wearing garments we offer fashion, comfort and

durability.
. Step# 3. Setting Objectives:
The mission answers the question, “What is our
business?” The objectives answer the question, “What
do we want to achieve?” Objectives must be clear,
ambitious but realistic, measurable and time-bound.
The mission points out the needs to be served. The
objectives indicate performance standards, e.g., market
share, profit, services, customer satisfaction, etc.
Objectives or goals are the desired or planned outcome
Step # 4. Identifying Strategic Business Unit (SBU):
A strategic business unit, popularly known as SBU, is a fully-functional unit of a
business that has its own vision and direction. Typically, a strategic business unit
operates as a separate unit, but it is also an important part of the company. It
reports to the headquarters about its operational status.

The SBU has three features- (1) It is a collection of related products meeting similar
needs, (2) The unit has its own rivals and it wants to surpass them through best
marketing strategies, (3) The manager of SBU organisation is directly responsible for
strategic marketing planning, control and profits.

.. Each SBU will have its own distinct mission, competition and strategy.
Step # 5. Selecting Appropriate Strategies:
Once the corporation has planned where it
wants to go, the next step is to answer the
question “How are we going to get there”?
Corporate strategies supply the best answer to
this vital question, viz., the best means to
achieve the desirable goals and fulfill the
mission.
Corporate Policy

INTRODUCTION
Corporate Policy is usually a documented set of broad
guidelines formulated after an analysis of all internal
and external factors the can affect a firms objective,
operations & plans. Corporate Policy is the
guideline which helps the management to carry out its
activities in a efficient and effective manner so that the
objective of the organization are met. It gives the
management a transparent guideline to take their
Decisions and helps the managers in identification of the
solutions & the problems. It provides framework in which he has
to take the decisions
II. DETERMINANTS OF CORPORATE POLICY
The Corporate policy of an organization is influenced
by various inter related and interacting factors.
These factors can be classified as internal and external
factors. The determinants which are internal to the
organization and which influence the decisions directly
are known as internal factors and those factors which
act from outside the organization and influence it
externally are called external factors. These factors are
discussed below:
III. INTERNAL DETERMINANTS
These determinants include the corporate mission,
corporate objectives, corporate resource and the
management values which are all internal to the
organization and play a very important role in the
formulation of the corporate policy. All the above
factors influence the corporate decision directly.
(a) Corporate Mission. The missions of the company stand for the purpose for which
it exists and operate. The policy makers should be very clear in their minds for which
the company exists and operate and accordingly formulate the policies and
guidelines for managerial and other activities so that corporate mission is
accomplished.
(b) Corporate Objective. The organization objectives are designed, framed and
operationalised to work for achieved them. Corporate policy should be made by
taking into account the economic, financial and other objectives of the company.
(c) Resources. The availability of resources are considered in formulating the
corporate policy. In other words, an organization can decide its activities by keeping
the resources.
(d) Management Values. Another internal determinant of corporate policy is
management value. The corporate policy is influenced by the values of the persons
responsible for formulating it. Their views reflect the values absorbed by the
organization. These values differ from organization to organization.
IV. EXTERNAL DETERMINANTS
These Determinants include all these factors which act from outside the firm and
influence the organization externally. The external determinants of corporate
policy include – Industry structure, social environment, political environment, economic
environment, technology etc
(a) Industry Structure. The structure of the firm depends upon its size, barriers of the
entry into the market, number and market captured by the competitors, strategies and
policies of the competitors. All these factors are kept in mind while formulating the
corporate policy of any business house. These factors decide the existence of the firm in
the market.
(b) Social Environment. The various groups in the society also influence and affect the
activities of an organization / firms. The social, religious, cultural, and ethnic factors of the
managers running the business also influence the making of the policies of the
organization. So the above factors are be considered which making the
policy.
(c) Political Environment. The firm has to carry out its activities in accordance with the
government’s regulations and policies. If these are not complied with, the firm would not
be able to meet its objectives in an efficient manner. The various policies like Monitory
Policy, Fiscal Policy & credit policy of the firm.
(d) Economic Environment.
Economic environment comprises of the demand, supply,
prices trends, the national income availability of inputs, the
various institutions etc. It includes all those factors which
influence the policies of the firm. Therefore, it becomes
one of the most important determinants of corporate
policy.
(e) Technology.
The Technologies are changing rapidly throughout the world
and these changes are entering the market at regular or
intermittent intervals. For any organization to sustain and
remain in the market has to cope up with these technologies
changes. Thus technology plays a very important role in
formulating the corporate policy.
IMPORTANCE OF CORPORATE POLICY IN
TODAY’S SCENARIO
For effective management, the solving of day-to-day
problems is not enough. What is required is the proper
assessment of all kinds of activities and operations
taking place in the organization. After the assessment,
they are to be defined in clear cut way, so that
objectives could be met. For definition of the business
activities and their efficient implementation, the
selection and application of policies is required.
Without a guiding light, it would become very difficult
for the business to go on and policies act as guide and
facilitate the manager to direct all activities towards the
same goals. The importance of Corporate Policy may
be well seen in following areas:
manner.
(b) They provide a clear cut course of attainment of business objectives.
(c) If a paper explicit policy has been formulated, many of the details
could be conveniently handled by the sub- ordinates and management
would not unnecessarily waste its time and energy in doing them.
(d) Policies provide a guide and frame work for decision making.
(e) Policies encourage delegation of power of decision making.
(f) Good policies provide a direction in which all management activities
are focused.
(g) Policies provide stability to the action of the members of the firm.
(h) Policies deter the subordinates to rethink on the day to day issues
and thus avoid repetitive analysis of issues.
(i) Policies facilitate evaluation of performance by acting as a standard.
(j) They help in solving the problems optimum utilization of scarce
resources.
(k) The sound policies help in building good public image of the
business.
(l) Policies provide the firm with clear objectives with which the
managers can decide about the future course of action.
(m) They act as tool for coordination and control.
VI. CONCLUSION
Thus, Corporate Policy is very important for an
organization and help in the overall development and
growth. A Sound policy provide satisfaction to the
employees in term of working conditions, culture,
authority responsibility and relationships.