UNIT I: PART I

Introduction:
1. Strategy comes from Greek word “ Strategos ” which means a plan to compete with
enemy (in army).
2. Strategy means that a plan of action designed to achieve a long-term overall goal.
3. So, the Strategic management meant that making an action plan to achieve the
organizational goals effectively and efficiently.
4. We can say that it a game plan of any organization to compete with competitors and
stay for long time in market on top position.
5. It is an integrated system, which focuses on all departments of an organization
(Marketing, finance, production, R&D and so on.) to achieve the organizational goals
successfully.

Strategy - Meaning
Strategy is the determination of long-term goals and objectives of an enterprise and the adoption
of the course of action and the allocation of resources necessary for carrying out these goals.
Strategy is management’s plan game plan for strengthening the organization’s position, pleasing
customers, and achieving performance targets.

Strategy - Definition
Strategy is “a unified comprehensive and integrated plan designed to ensure that the basic
objectives of the enterprise are achieved “-Glueck

Strategy is “ a determination of the 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 – Alfred Chandler

Strategic management is “a stream of decisions and actions ,which leads to the development of
an effective strategy to help achieve corporate objectives “-Glueck

Nature of Strategy
1. Strategy is a major course of action through which organisation relates itself to its
environment. (External)
2. Strategy is blend of internal &external factors. Face opportunities & threats provided by
external factors, internal factors are matched with them.
3. Strategic actions are different for different situations. Strategy is combination of actions
to solve a certain problem to achieve a desirable end
4. Strategy may involve contradictory actions simultaneously or with a gap of time like
closing down some operations and expanding some at same time.
5. Strategy is future oriented. New situations, which have not arisen in past will require
revised Strategic Actions.
6. Strategy requires some systems and norms for its efficient adoption in any organisation.
7. Strategy provides overall framework for guiding enterprise thinking and action.
Types of strategy
Strategy can be formulated on three different levels :
⮚ Corporate level

⮚ Business unit level

⮚ Functional or departmental level

Business level:
Business level strategies are formulated for specific strategic business units and relate to a
distinct product -maker area. It involves defining the competitive position of a strategic business
unit. The business level strategy formulation is based upon the generic strategies of overall cost
leadership, differentiation, and focus . For example , your firm may choose overall cost
leadership as a strategy to be pursued in its steel business , differentiation in its tea business , and
focus in its automobile business. The business level strategies are decided upon by the heads of
strategic business units and their teams in light of the specific nature of the industry in which
they operate .
⮚ Involves defining the competitive position of a strategic business unit .

⮚ Decided upon by the heads of strategic business units and their teams .
Functional level:
Functional level strategies relate to the different functional areas which a strategic business unit
has , such as marketing , production and operations , finance , and human resources . These
strategies are formulated by the functional heads along with their teams and are aligned with the
business level strategies. The strategies at the functional level involve setting up short – term
functional objectives , the attainment of which will lead to the realization of the business level
strategy .

For example, the marketing strategy for a tea business which is following the differentiation
strategy may translate into launching and selling a wide variety of tea variants through company
-owned retail outlets. This may result in the distribution objective of opening 25 retail outlets in a
city : and producing 15 varieties of tea may be the objective for the production department . The
realization of the functional strategies in the form of quantifiable and measurable objectives will
result in the achievement of business level strategies as well .
⮚ Formulated by the functional heads along with their teams .

⮚ Involves setting up short -term functional objectives.

⮚ Understand the three levels of strategy for an organization

Corporate level :
Corporate level strategy defines the business areas in which your firm will operate. It deals with
aligning the resource deployments across a diverse set of business areas, related or unrelated.
Strategies formulation at this level involves integrating and managing the diverse businesses and
realizing synergy at the corporate level. The top management team is responsible for formulating
the corporate strategy. The corporate strategy reflects the path toward attaining the vision of your
organisation . For example , your firm may have four distinct lines of business operations ,
namely , automobiles, steel, tea , and telecom. The corporate level strategy will outline whether
the organisation should compete in or withdraw from each of these lines of businesses , and in
which business unit , investments should be increased , in line with the vision of your firm .
⮚ Defines the business areas in which your firm will operate.

⮚ Involves integrating and managing the diverse business and realizing synergy at the
corporate level .
⮚ Top management team is responsible.

It is not uncommon to find many companies, or a group of companies, working in different

business lines with regard to either products/services, markets or technology.
Here are a few illustrations :
 ⮚ Flow more group of companies manufactures pumps for irrigation, a range of engineering
products, turbines, castings, specialised conversion equipments, and has recently started
the manufacture of polyester films. It also offers engineering consultancy services for
power projects and environmental engineering,
⮚ Brooke Bond India Ltd., offers a range of over 34 different products in product lines of
tea, coffee and spices. Operating through a countrywide sales and marketing network for
consumers, it also offers institutional business service for hotels, restaurants, clubs and
other bulk buyers like canteens and industrial establishments. Thus, it serves two entirely
different sets of customers individual and institutional.
⮚ Sundaram Clayton and its associate companies TVS Suzuki, TVS Electronics, and TVS
Whirlpool- operate in technology areas as diverse as brake and signal systems for
railways, two-wheelers, computer peripherals and electrical appliances.

For many companies, such as illustrated above, a single strategy is not only inadequate but also
inappropriate. The need is for multiple strategies at different levels. In order to segregate,
different units or segments, each performing a common set of activities, many companies
organise on the basis of operating divisions or, simply, divisions. These divisions may also be
known as profit centres or strategic buisness units (SBUs).

An SBU, as defined by Sharplin, is "any part of a business organisation which is treated

separately for strategic management purposes."

Benefits of Strategic Management

1. Strategic management is the process of formulating, implementing and evaluating
strategies to achieve its organization objectives.
2. Organization acts proactively rather than reactive to any situation.
3. Communicates the mission, vision, objectives and policies to all the employees to
understand the purpose of organization
4. Gathers information from external and internal environment assists in formulating
strategies for the future success of an organization.

Dis-advantages of Strategic Management

1. Time Consuming
2. Ignorance of other Managerial Functions
3. Unsatisfaction in employees
4. Depression due to failure in target
5. Protest of employees
6. Demand for more reward and facilities
7. Dependability on-practical planning
8. Changes in technical factors
Need of Strategic Management

1. Increasing Rate of Changes:

The environment in which the business operates’ is fast, changing. A business concern which
does not keep its policies up-to-date, cannot survive for a long time in the market. In turn, the
effective strategy optimises profits over a long run.

2. Higher Motivation of Employees: The employees (human resources) are assigned clear cut
duties by the top management viz. what is to be done, who is to do it, how to do it and when to
do it. ? When strategic management is followed in any organisation, employees become loyal,
sincere and goal oriented and their efficiency is also increased.They also get rewards and
promotions resulting in higher motivation for the employees. A strategy must respect human
values and duly consider the aspirations of individual members.

3. Strategic Decision-Making:
Under strategic planning, the first step is to set the goals or objectives of a business concern.
Strategic decisions taken under strategic management help the smooth sailing of an enterprise.
Strategic planning is the overall planning of operations for effective implementation of policies.

4. Optimization of Profits:
An effective strategy should develop from policies of a concern. It takes into account actions of
competitors. It considers future operations in respect of market area and opportunity, executive
competence, available resources and limitations imposed by the Government. An effective
strategy should optimise profits over the long run.
6. Miscellaneous:

Mr. H.N Broom in his book on ‘Business Policy and Strategic Action’ has mentioned that a
strategy has a primary concern with the following:
a) Marketing opportunity: Products, prices, sales potential and sales promotion.
b) Available distribution channel and costs.
c) The scale of company operations.
d) The manufacturing process required to implement their scale of operations (with an optimal
production cost)
e) The research and innovation programme.
f) The type of organisation
g) The amounts and proportions of equity and credit capital available to the firm and their
combined adequacy.
h) The planned rate of growth.

Thus, strategy is important because it makes possible the implementation of policies and long
range plans for attaining company goals, creation of effective business strategy requires a basic
knowledge of economic theory, management principles, accounting, statistics, finance and
administrative practice.

Characteristics of Strategic Management

Understanding Strategy Fundamentals
To engage in strategic management, managers must first have an excellent grasp of what strategy
means. Managers must learn the impact of both individual and team contributions on the
direction of the organization. Through a process of curiosity, inquiry and knowledge transfer –
top-down, bottom-up and lateral – managers learn to understand the actions that further the
organizational mission, as well as those actions that detract from the organization's values and
principles.

Scanning Outside-In and Inside-Out

There are a variety of analysis tools available that can be used to inform management strategy.
The SWOT analysis is a common tool for analyzing external and internal factors. SWOT stands
for strengths, weaknesses, opportunities and threats. It is used to examine which environmental
and internal factors affect the organization's position and how successfully they are meeting the
goals and objectives of the organization and its departments. Characteristics that leaders exhibit
during this step in the strategic process include strong analytical skills, as well as the ability to
synthesize and present data.

Creating Strategy
Formulating strategy can only begin once the leadership team has a good understanding of what
strategic management entails. Determining the strategic direction for an organization is a major
undertaking, and executive leadership is primarily responsible for this task. A strategic plan is
only as useful as the quality of information that goes into it. Gathering requirements that are
accurate and measurable is key. If executive leadership considers input and feedback from
multiple business areas, the organization is far more likely to create a robust, inclusive and
feasible strategic plan.

Formulating a strategic plan involves discussions on what constitutes wise business decisions,
how to recognize competition and how to respond to it. Also, strategic versus day-to-day
business practice must be determined. Leadership characteristics during this phase of strategic
management include forward thinking and the rationale to determine what constitutes in-time
action. One of the differences between strategic and day-to-day business operations is time –
strategy occurs over time and has a long-term impact while day-to-day business operations
produce immediate or instant measures that may have a short-term effect.

Implementing the Structure

Putting a structure in place is the fourth step in the strategic management process. The University
of Minnesota course on strategic management teaches students to consider corporate culture
when constructing an organization's strategic framework. It states that integral components of
strategic management are corporate governance, social responsibility and sustainability. At a
minimum, leadership characteristics necessary for this stage in the strategic management process
include the ability to operationalize strategic plans, craft innovative solutions, consider long-term
goals and how leadership's decision-making affects stakeholders.

Importance of Strategic Management

Strategic Management offers both financial & non financial benefit to an organisation as
listed below
1. It allows identification, Prioritization &exploitation of opportunities
2. Provides objective view of management problems
3. Framework for Improved co-ordination .
4. It minimizes the effect of adverse conditions
5. It allows major decisions to better support established objectives
6. It allows more efficient allocation of time.
7. It allows fewer resources and less time to be devoted
8. It creates a framework for internal communication
9. It helps to integrate the behaviour of individuals
10. It provides basis for the clarification of individual responsibility.
11. It encourages to forward thinking
12. It provides a co operative , integrated approach to tackling problems.
13. It encourages a favourable attitude
14. It gives a degree of discipline.

Strategic Management Process

1. Defining the levels of strategic intent of the business:

⮚ Establishing vision

⮚ Designing mission

⮚ Setting objectives
2. Formulation of strategy
 ⮚ Performing environmental and organizational appraisal

⮚ Considering strategies

⮚ Carrying out strategic analysis

⮚ Making strategies

⮚ Preparing strategic plan

3. Implementation of strategy
⮚ Putting strategies into practice

⮚ Developing structures and systems

⮚ Managing behavioural and functional implementation

4. Strategic Evaluation and Control
⮚ Performing evaluation

⮚ Exercising control

⮚ Recreating strategies

⮚ Strategic Management is all about specifying organization’s vision, mission and

objectives,
⮚ environment scanning, crafting strategies, evaluation and control.