Unit 1

UNIT I - INTRODUCTION
Introduction to Strategic management – Phases of Strategic management - Basic Strategic
Management Model - Strategic Intent- Introduction to Mission, Vision, Objectives , goals,
strategies and policies - Internal environmental strategic factors – External environmental
strategic factors – Strategy formulation Process - Strategy Formulation - Evaluation, control
and feedback / Learning process - Impact of globalization - Globalization - Challenges to
strategic management – Mintzberg’s modes of Strategic decision making

1. Introduction to Strategic management

Strategic management is a set of managerial decisions and actions that help determine the
long-term performance of an organization. It includes environmental scanning (both external
and internal), strategy formulation (strategic or long-range planning that includes setting
objectives, making strategic decisions, allocating resources), strategy implementation, and
evaluation and control. Originally called business policy, strategic management has advanced
substantially with the concentrated efforts of researchers and practitioners. Today we
recognize both a science and an art to the application of strategic management techniques.
SM helps organizations align their activities, adapt to changes in the market, and gain a
competitive advantage to ensure an organization’s long-term success.
Example of Strategic Management
Amazon employed several strategic management techniques to overcome local players like
Snapdeal and Flipkart in the Indian market:

• Strong Market Entry: Amazon entered the Indian market with significant investment
and long-term vision, demonstrating its commitment to success. They strategically
focused on building a robust logistics infrastructure, expanding product offerings, and
offering competitive pricing.
• Customer-Centric Approach: Amazon prioritized providing exceptional customer
experience by offering fast and reliable delivery, easy returns, and a wide range of
products. They leveraged their global expertise in e-commerce to create a seamless
online shopping experience for Indian customers.
• Continuous Innovation: Amazon introduced innovative features and services tailored
to the Indian market, such as Hindi language support, regional content, and localized
payment options. They constantly adapted their offerings based on customer feedback
and market trends.
• Competitive Pricing: Amazon employed a competitive pricing strategy to attract
customers, offering discounts and deals on popular products. They leveraged their
global scale and supply chain efficiencies to provide cost-effective solutions.
• Strategic Partnerships: Amazon forged partnerships with local retailers, brands, and
small businesses, enabling them to expand their product range and offer exclusive

1
 deals. This approach helped them tap into the vast Indian market and build trust
among local sellers.
• Investments in Technology: Amazon significantly invested in technology and data
analytics to enhance customer personalization, improve operational efficiency, and
drive insights for strategic decision-making.
These strategies allowed Amazon to differentiate itself, gain market share, and gradually
surpass local players like Snapdeal and Flipkart in terms of customer trust, brand recognition,
and market dominance.
Objectives of Strategic Management
The objectives of SM are:

• Setting Direction: It aims to establish a clear direction for the organization by defining
its vision, mission, and long-term goals. It helps align the efforts of the organization
towards a common purpose.
• Creating Competitive Advantage: It identifies and develops strategies that give the
organisation a competitive edge. This includes leveraging strengths, exploiting
opportunities, and mitigating risks to outperform competitors.
• Resource Allocation: Effective SM ensures optimal allocation of resources, including
financial, human, and technological assets. It involves allocating resources based on
priorities, maximizing efficiency, and achieving the desired outcomes.
• Adapting to Change: It helps organizations adapt to the dynamic business environment
by scanning for external factors, anticipating changes, and formulating proactive
strategies. It enables the organization to stay agile and responsive to market shifts and
emerging trends.
• Enhancing Performance: The ultimate objective of SM is to enhance overall
organizational performance. This includes achieving financial growth, increasing
market share, improving operational efficiency, and delivering value to stakeholders.
• Long-Term Sustainability: It focuses on ensuring the long-term sustainability and
viability of the organization. It involves strategically considering the social,
environmental, and ethical aspects to foster responsible and sustainable business
practices.
• Risk Management: Strategic management involves assessing risks and uncertainties
associated with various strategies and making informed decisions to mitigate them. It
helps minimise potential threats and seize opportunities while considering potential
risks and their potential impact.
Benefits of Strategic Management
Strategic management emphasizes long-term performance. Many companies can manage short-term
bursts of high performance, but only a few can sustain it over a longer period of time. To be successful
in the long-run, companies must not only be able to execute current activities to satisfy an existing
market, but they must also adapt those activities to satisfy new and changing markets.

The three most highly rated benefits of strategic management

2
 1. A clearer sense of strategic vision for the firm.
2. A sharper focus on what is strategically important.
3. An improved understanding of a rapidly changing environment
To sum up, Strategic management is a vital discipline that empowers organizations to navigate
the complexities of the business world. It involves setting clear objectives, devising effective
strategies, and continuously assessing and adapting to changing circumstances. By doing so,
businesses can remain competitive, seize opportunities, and achieve long-term success.
Strategic management is not just a tool. It’s a mindset that fosters resilience and innovation,
allowing organizations to thrive in dynamic environments
(Note: Sections 2 and 3 together constitute the complete answer for questions on
Phases/Steps/ Components of Strategic Management)
2. Phases of Strategic management
A firm generally evolves through the following four phases of strategic management:

Phase 1—Basic financial planning: Managers initiate serious planning when they are requested to
propose the following year’s budget. Projects are proposed on the basis of very little analysis, with
most information coming from within the firm. The sales force usually provides the small amount of
environmental information. Normal company activities are often suspended for weeks while managers
try to cram ideas into the proposed budget. The time horizon is usually one year.

Phase 2—Forecast-based planning: As annual budgets become less useful at stimulating long-
term planning, managers attempt to propose five-year plans. At this point, they consider
projects that may take more than one year. In addition to internal information, managers
gather any available environmental data—usually on an ad hoc basis—and extrapolate current
trends five years into the future. This phase is also time consuming, often involving a full
month or more of managerial activity to make sure all the proposed budgets fit together. The
process gets very political as managers compete for larger shares of limited funds. Seemingly
endless meetings take place to evaluate proposals and justify assumptions. The time horizon
is usually three to five years.
Phase 3—Externally oriented (strategic) planning: Top management takes control of the
planning process by initiating strategic planning. The company seeks to increase its
responsiveness to changing markets and competition by thinking strategically. Planning is
taken out of the hands of lower-level managers and concentrated in a planning staff whose
task is to develop strategic plans for the corporation. Consultants often provide the
sophisticated and innovative techniques that the planning staff uses to gather information and
forecast future trends. Organizations start competitive intelligence units. Upper-level
managers meet once a year led by key members of the planning staff to evaluate and update
the current strategic plan. Such top-down planning emphasizes formal strategy formulation
and leaves the implementation issues to lower-management levels. Top management typically
develops five-year plans with help from consultants but minimal input from lower levels.
Phase 4—Strategic management: Realizing that even the best strategic plans are worthess
without the input and commitment of lower-level managers, top management forms planning

3
groups of managers and key employees at many levels, from various departments and
workgroups. They develop and integrate a series of strategic plans aimed at achieving the
company’s primary objectives. Strategic plans at this point detail the implementation,
evaluation, and control issues. Rather than attempting to perfectly forecast the future, the
plans emphasize probable scenarios and contingency strategies. The sophisticated annual
five-year strategic plan is replaced with strategic thinking at all levels of the organization
throughout the year. Strategic information, previously available only centrally to top
management, is available virtually to people throughout the organization. Instead of a large
centralized planning staff, internal and external planning consultants are available to help
guide group strategy discussions. Although top management may still initiate the strategic
planning process, the resulting strategies may come from anywhere in the organization.
Planning is typically interactive across levels and is no longer strictly top down. People at all
levels are now involved
3. Basic Strategic Management Model
Strategic management consists of four basic elements:

i. Environmental scanning
ii. Strategy formulation
iii. Strategy implementation
iv. Evaluation and control

i. Environmental Scanning
Environmental scanning is the monitoring, evaluating, and disseminating of information from
the external and internal environments to key people within the corporation. Its purpose is to
identify strategic factors—those external and internal elements that will assist in the analysis
in deciding the strategic decisions of the corporation. The simplest way to conduct
environmental scanning is through SWOT analysis- Strengths, Weaknesses, Opportunities, and
Threats that are strategic factors for a specific company.
The external environment consists of variables (Opportunities and Threats) that are outside
the organization and not typically within the short-run control of top management. These
variables form the context within which the corporation exists. They may be general forces
and trends within the natural or societal environments or specific factors that operate within
an organization’s specific task environment—often called its industry.
The internal environment of a corporation consists of variables (Strengths and Weaknesses) that are
within the organization itself and are not usually within the short-run control of top management.
These variables form the context in which work is done. They include the corporation’s structure,
culture, and resources. Key strengths form a set of core competencies that the corporation can use to
gain competitive advantage

4
5
 ii. Strategy formulation

Strategy formulation is the process of investigation, analysis, and decision making that provides the
company with the criteria for attaining a competitive advantage. It includes defining the competitive
advantages of the business (Strategy), crafting the corporate mission, specifying achievable objectives,
and setting policy guidelines.

Mission: Stating Purpose

An organization’s mission is the purpose or reason for the organization’s existence. It announces what
the company is providing to society—either a service such as consulting or a product such as
automobiles. A well-conceived mission statement defines the fundamental, unique purpose that sets
a company apart from other firms of its type and identifies the scope or domain of the company’s
operations in terms of products (including services) offered. Mission describes what the organization
is now; vision describes what the organization would like to become.

Objectives: Listing Expected Results

Objectives are the end results of planned activity. They should be stated as action verbs and tell what
is to be accomplished by when and quantified if possible. The achievement of corporate objectives
should result in the fulfilment of a corporation’s mission.

Goal

Goal as an open-ended statement of what one wants to accomplish, with no quantification of what is
to be achieved and no time criteria for completion. For example, a simple statement of “increased

6
profitability” is thus a goal, not an objective, because it does not state how much profit the firm wants
to make the next year. A good objective should be action-oriented and begin with the word to. An
example of an objective is “to increase the firm’s profitability in 2014 by 10% over 2013.”

Strategy: Defining the Competitive Advantages

A strategy of a corporation forms a comprehensive master approach that states how the corporation
will achieve its mission and objectives. It maximizes competitive advantage.

The typical business firm usually considers three types of strategy: corporate, business, and functional.

1. Corporate strategy describes a company’s overall direction in terms of its general attitude
toward growth and the management of its various businesses and product lines. Corporate
strategies typically fit within the three main categories of stability, growth, and retrenchment.

2. Business strategy usually occurs at the business unit or product level, and it emphasizes
improvement of the competitive position of a corporation’s products or services in the specific
industry or market segment served by that business unit. Business strategies may fit within
the two overall categories: competitive and cooperative strategies.

3. Functional strategy is the approach taken by a functional area to achieve corporate and
business unit objectives and strategies by maximizing resource productivity. It is concerned
with developing and nurturing a distinctive competence to provide a company or business unit
with a competitive advantage. Examples of research and development (R&D) functional
strategies are technological followership (imitation of the products of other companies) and
technological leadership (pioneering an innovation).

Business firms use all three types of strategy simultaneously. A hierarchy of strategy is a
grouping of strategy types by level in the organization. Hierarchy of strategy is a nesting of one
strategy within another so that they complement and support one another.

Functional strategies support business strategies, which, in turn, support the corporate
strategy(ies).

7
 Policies: Setting Guidelines

A policy is a broad guideline for decision making that links the formulation of a strategy with
its implementation. Companies use policies to make sure that employees throughout the firm
make decisions and take actions that support the corporation’s mission, objectives, and
strategies.

iii. Strategy implementation is a process by which strategies and policies are put into action
through the development of programs, budgets, and procedures. This process might
involve changes within the overall culture, structure, and/or management system of the
entire organization. Except when such drastic corporate-wide changes are needed, the
implementation of strategy is typically conducted by middle- and lower-level managers,
with review by top management. Sometimes referred to as operational planning, strategy
implementation often involves day-to-day decisions in resource allocation.

Programs and Tactics: Defining Actions

A program or a tactic is a statement of the activities or steps needed to support a strategy. The terms
are interchangeable. In practice, a program is a collection of tactics where a tactic is the individual
action taken by the organization as an element of the effort to accomplish a plan. A program or tactic
makes a strategy action-oriented. It may involve restructuring the corporation, changing the
company’s internal culture, or beginning a new research effort.

Budgets: Costing Programs

A budget is a statement of a corporation’s programs in terms of cost or expenditure. Used in planning

and control, a budget lists the detailed cost of each program. The budget thus not only serves as a
detailed plan of the new strategy in action, it also specifies through pro forma financial statements the
expected impact on the firm’s financial future.

Procedures: Detailing Activities

Procedures, sometimes termed Standard Operating Procedures (SOP), are a system of sequential steps
or techniques that describe in detail how a particular task or job is to be done. They typically detail the
various activities that must be carried out in order to complete the corporation’s program.

Evaluation and control

Evaluation and control is a process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired performance. Managers at all
levels use the resulting information to take corrective action and resolve problems. Although
evaluation and control is the final major element of strategic management, it can also pinpoint
weaknesses in previously implemented strategic plans and thus stimulates the entire process to begin
again.

Performance is the end result of activities. It includes the actual outcomes of the strategic
management process. The practice of strategic management is justified in terms of its ability to
improve an organization’s performance, typically measured in terms of profits and return on
investment. For evaluation and control to be effective, managers must obtain clear, prompt, and
unbiased information from the people below them in the corporation’s hierarchy. Using this
information, managers compare what is actually happening with what was originally planned in the
formulation stage.

8
Feedback/learning process. Arrows are drawn coming out of each part of the model and taking
information to each of the previous parts of the model. As a firm or business unit develops strategies,
programs, and the like, it often must go back to revise or correct decisions made earlier in the process.

For example, poor performance (as measured in evaluation and control) usually indicates that
something has gone wrong with either strategy formulation or implementation. It could also mean
that a key variable, such as a new competitor, was ignored during environmental scanning and
assessment.

What is Strategic Intent?

• Strategic Intent refers to a predetermined set of aspirations that an organisation
desires to achieve. It forms the core of strategic management by building a framework
that provides a direction to achieve the organisational ambitions.
• Strategic intent of an organisation defines what the organisation wants to achieve in
the long term.
• Strategic Intent refers to the purposes the organisation strives for.
• Strategic Intent lays down the frame work within which firms would operate, adopt a
predetermined direction, and attempt to achieve the goals.
• According to Hamel & Prahalad “strategic intent is an ambitious and compelling dream
that provides the emotional and intellectual energy for journey for future”
• Strategic intent includes various elements such as vision, mission, business definition
goals and objective.
• Strategic Intent envisions a desired leadership positioning and establishes the criterion
the organisation will use for charting its progress. In addition to ambitions of the
organisation; it encompasses active management process that includes focussing the
organisation’s attention on winning. It covers motivating the people by communicating
the values, targets. The intent encourages individual and team contributions and
attempts sustaining enthusiasm by providing new operational definitions. The
Strategic Intent guides the organisation through changing circumstances and guides
use of resource allocations.

9
Vision:
A vision is considered more as a dream for future that becomes real when visionary take action
to materialize it. Vision is future aspirations that lead to an inspiration. It defines the very

10
purpose of existence of a company. The essence of a vision is forward looking view of what an
organisation wishes to become.
Strategic Vision is different from Mission Statement: Strategic Vision deals with where we are
going, whereas Mission Statement deals with Company’s present business scope and purpose.
A company Mission is guided by the buyer’s needs it seeks to satisfy, the customer groups and
market segments it is endeavouring to serve, and the resources and technologies that it is
deploying in trying to please customers and achieve a Market and Industry position.

(Impact of globalization - Globalization - Challenges to strategic management: To study from

the prescribed textbook pdf)
Mintzberg’s modes of Strategic decision making
According to Henry Mintzberg, the three most typical approaches, or modes, of strategic
decision making are entrepreneurial, adaptive, and planning (a fourth mode, logical
incrementalism, was added later by Quinn)
1. Entrepreneurial mode: Strategy is made by one powerful individual. The focus is on
opportunities; problems are secondary. Strategy is guided by the founder’s own vision
of direction and is exemplified by large, bold decisions. The dominant goal is growth
of the corporation.
Amazon.com, founded by Jeff Bezos, is an example of this mode of strategic decision making.
The company reflected Bezos’ vision of using the Internet to market books and more. Although
Amazon’s clear growth strategy was certainly an advantage of the entrepreneurial mode,
Bezos’ eccentric management style made it difficult to retain senior executives.
2. Adaptive mode: This decision-making mode is characterized by reactive solutions to
existing problems, rather than a proactive search for new opportunities. Much
bargaining goes on concerning priorities of objectives. Strategy is fragmented and is
developed to move a corporation forward incrementally. This mode is typical of most
universities, many large hospitals, a large number of governmental agencies, and a
surprising number of large corporations
3. Planning mode: This decision-making mode involves the systematic gathering of appropriate
information for situation analysis, the generation of feasible alternative strategies, and the
rational selection of the most appropriate strategy. It includes both the proactive search for
new opportunities and the reactive solution of existing problems.
4. Logical incrementalism: A fourth decision-making mode can be viewed as a synthesis
of the planning, adaptive, and, to a lesser extent, the entrepreneurial modes. In this
mode, top management has a reasonably clear idea of the corporation’s mission and
objectives, but, in its development of strategies, it chooses to use “an interactive

11
process in which the organization probes the future, experiments, and learns from a
series of partial (incremental) commitments rather than through global formulations
of total strategies.” Thus, although the mission and objectives are set, the strategy is
allowed to emerge out of debate, discussion, and experimentation. This approach
appears to be useful when the environment is changing rapidly and when it is
important to build consensus and develop needed resources before committing an
entire corporation to a specific strategy.

12