Module: 1: Strategy and Process

Suggested Readings:
1. David, F. R. & David F. R.: Strategic Management: A Competitive Advantage
Approach, Concepts and Cases
2. Charles W. L. Hill, Melissa A., Schilling & Gareth R. Jones: Strategic
management: An Integrated Approach
3. Thomas L. Wheelen: Strategic Management and Business Policy

Historical Perspective of Strategic Management: A Summary

Strategic management has evolved over time through various schools of thought,
shaped by economic, military, and business influences. Below is a brief historical
timeline of its development:

1. Early Foundations (Pre-1950s) – Military and Economic Influence

• Sun Tzu’s "The Art of War" (5th Century BC) – Early strategic thought
focused on warfare principles, later adapted for business strategy.
• Adam Smith’s "The Wealth of Nations" (1776) – Introduced the concept of
division of labor, influencing business strategy.
• Industrial Revolution (18th-19th Century) – Led to large-scale production,
prompting businesses to plan for efficiency.

2. Classical Strategic Management (1950s-1970s) – Formal Planning

• Alfred Chandler (1962) – Emphasized that structure follows strategy, linking

organizational structure to strategy.
• Igor Ansoff (1965) – Developed corporate strategy models, including
diversification and market expansion.
• Michael Porter (1979) – Introduced the Five Forces Model, shaping
competitive strategy thinking.

3. Contemporary Strategic Management (1980s-Present) – Dynamic and Adaptive

Strategies

• Resource-Based View (RBV) (1980s-1990s) – Focused on internal resources

and capabilities rather than external competition.
• Blue Ocean Strategy (2005) – Shifted focus from competition to creating new
market spaces.
• Digital and Agile Strategy (2010s-Present) – Businesses adopt AI, data
analytics, and agile frameworks to stay competitive in a fast-changing
environment.

Conclusion:

Strategic management has transitioned from rigid, long-term planning to flexible,

data-driven, and innovation-focused approaches, adapting to technological
advancements and global market changes.

Conceptual Framework for Strategic Management

Strategic management is a systematic process that involves planning, executing, and

evaluating strategies to achieve long-term organizational goals. A conceptual
framework provides a structured approach to understanding how businesses
formulate and implement strategies.

Key Components of the Conceptual Framework

1. Strategic Inputs (Analysis & Environment Scanning)

Before formulating a strategy, organizations must analyze both internal and external
environments.

• External Environment (Opportunities & Threats)

o PESTEL Analysis (Political, Economic, Social, Technological,
Environmental, Legal)
o Porter’s Five Forces Model (Industry Competition Analysis)
o Market Trends & Competitive Landscape
• Internal Environment (Strengths & Weaknesses)
o Resource-Based View (RBV) (Tangible & Intangible Resources)
o Core Competencies & Capabilities (Prahalad & Hamel, 1990)
o Value Chain Analysis (Porter, 1985)

Five Forces Model

The Five Forces Model was developed by Michael E. Porter to analyze the
competitive forces shaping an industry. It helps businesses assess their position and
develop strategies to gain a competitive advantage. The model includes the
following five forces:
Threat of New Entrants
• How easy or difficult is it for new competitors to enter the industry?
• Factors influencing this include economies of scale, capital requirements,
brand loyalty, government regulations, and access to distribution channels.
Bargaining Power of Suppliers
• How much influence do suppliers have over pricing and supply availability?
• Fewer suppliers or unique/raw materials increase supplier power, while many
suppliers reduce their influence.
Bargaining Power of Buyers (Customers)
• How much control do customers have over pricing and demand?
• If customers can switch easily to competitors or buy in bulk, they have higher
bargaining power.
Threat of Substitutes
• Are there alternative products/services that can replace existing offerings?
• The presence of substitutes limits industry profitability by capping prices.
Industry Rivalry (Competitive Intensity)
• How intense is competition among existing players?
 • Factors include the number of competitors, industry growth rate,
differentiation, and cost structures.
Application of the Five Forces Model
• Helps businesses identify opportunities and threats.
• Assists in making strategic decisions such as pricing, expansion, and
differentiation.
• Useful for assessing profitability and long-term industry attractiveness.

2. Strategy Formulation (Planning & Choice of Strategy)

Based on environmental analysis, organizations develop a strategic plan.

• Corporate-Level Strategy (Overall Direction)

o Growth (Expansion, Diversification)
o Stability (Maintaining Market Position)
o Retrenchment (Turnaround, Divestment)
• Business-Level Strategy (Competitive Advantage)
o Porter’s Generic Strategies (Cost Leadership, Differentiation, Focus)
o Blue Ocean Strategy (Creating Uncontested Markets)
• Functional-Level Strategy (Departmental Support)
o Marketing, Finance, HR, Operations Strategies

3. Strategy Implementation (Execution & Resource Allocation)

Successful implementation requires aligning resources, structure, and leadership.

• Organizational Structure & Culture (Chandler’s "Structure Follows Strategy")

• Leadership & Change Management
• Resource Allocation & Performance Metrics

4. Strategy Evaluation & Control

Continuous monitoring ensures strategic objectives are met.

• Balanced Scorecard (Kaplan & Norton, 1992) (Financial, Customer, Internal

Processes, Learning & Growth)
• Key Performance Indicators (KPIs)
• Feedback Mechanism & Continuous Improvement

Conclusion

The conceptual framework for strategic management integrates analysis, strategy

formulation, implementation, and evaluation to achieve sustainable competitive
advantage. It is a dynamic process, requiring adaptability to changing environments
and emerging market trends.

Understanding Business Stakeholders

Stakeholders are individuals or groups that have an interest in or are affected by a

company’s operations. They can be classified into:
 • Internal Stakeholders: Employees, owners, shareholders, and management.
• External Stakeholders: Customers, suppliers, investors, government,
regulatory bodies, community, and competitors.

Each stakeholder group has distinct expectations and interests, which businesses
must align with their vision, mission, and purpose.

Vision, Mission, and Purpose – Key Differentiations

Concept Definition Focus Impact on Stakeholders

The long-term aspiration of
the company, depicting what Future- Inspires stakeholders by
Vision
it aims to achieve in the oriented providing a long-term direction.
future.
The company’s fundamental
Present- Guides operations, decisions,
Mission purpose and the approach to
oriented and stakeholder engagement.
achieving its vision.
Establishes a company’s role in
The deeper reason for the
Values- society and creates a
Purpose company’s existence beyond
driven meaningful connection with
profits.
stakeholders.

Stakeholder Alignment with Vision, Mission, and Purpose

1. Employees:
o Seek career growth, stability, and a sense of belonging.
o A strong vision and purpose motivate employees and increase
engagement.
2. Customers:
o Expect quality, value, and ethical business practices.
o A clear mission fosters trust and long-term relationships.
3. Investors & Shareholders:
o Look for financial stability and growth.
o Vision and purpose help investors assess the company’s long-term
potential.
4. Government & Regulators:
o Ensure compliance with laws and ethical standards.
o A well-defined mission ensures businesses operate responsibly.
5. Community & Society:
o Expect businesses to contribute positively to society.
o Purpose-driven businesses earn goodwill and long-term sustainability.

Examples of Companies Aligning Stakeholders with Vision, Mission, and Purpose

• Google
o Vision: "To provide access to the world's information in one click."
o Mission: "To organize the world's information and make it universally
accessible and useful."
o Purpose: Creating a knowledge-driven world through innovation and
technology.
• Tesla
 o Vision: "To create the most compelling car company of the 21st
century."
o Mission: "To accelerate the world’s transition to sustainable energy."
o Purpose: Reducing environmental impact through sustainable
innovation.

Conclusion

A business's vision, mission, and purpose serve as guiding principles that shape its
strategy, culture, and stakeholder relationships. Companies that effectively align
these elements with stakeholder expectations are more likely to achieve long-term
success, employee loyalty, customer trust, and sustainable growth.

The SM Model (Stakeholder Management Model)

The Stakeholder Management (SM) Model is a strategic framework used by

organizations to identify, analyze, engage, and manage stakeholders effectively. It
helps businesses align their operations with the interests and expectations of various
internal and external stakeholders, ensuring sustainable success.

1. Key Components of the SM Model

The SM Model consists of four major steps:

1.1 Stakeholder Identification

• Identify individuals, groups, or organizations affected by or affecting the

business.
• Categorize stakeholders into internal (employees, shareholders,
management) and external (customers, suppliers, government, society).

1.2 Stakeholder Analysis

• Assess stakeholder power, influence, and interest using models such as:
o Power-Interest Matrix (Mendelow’s Matrix)
o Salience Model (Urgency, Legitimacy, and Power)
• Prioritize stakeholders based on their ability to impact business success.

1.3 Stakeholder Engagement & Communication

• Develop tailored engagement strategies based on stakeholder needs.

• Use different communication channels (meetings, reports, social media,
partnerships) to maintain relationships.
• Ensure transparency and active dialogue to build trust.

1.4 Stakeholder Relationship Management & Monitoring

• Continuously monitor stakeholder expectations and adjust business strategies

accordingly.
• Use feedback mechanisms (surveys, reports, audits) to improve engagement
and decision-making.
• Align stakeholder interests with the company’s vision, mission, and purpose
to drive long-term value.
2. Importance of the SM Model

✔ Enhances Corporate Reputation – Strengthens relationships with key

stakeholders.
✔ Reduces Business Risks – Helps anticipate potential issues and manage crises
effectively.
✔ Improves Decision-Making – Ensures diverse perspectives are considered in
strategic planning.
✔ Fosters Sustainability & CSR – Aligns business goals with social responsibility and
ethical practices.
✔ Drives Competitive Advantage – Strengthens customer loyalty, employee
satisfaction, and investor confidence.

3. Application of the SM Model in Business

Stakeholder Key Interests Engagement Strategies

Job security, career growth, Training programs, feedback
Employees
fair compensation mechanisms, open communication
Quality products, fair pricing, Customer service, surveys, loyalty
Customers
ethical practices programs
Profitability, transparency, Investor relations, financial reports,
Investors
growth potential corporate governance
Regulatory compliance, Policy adherence, corporate social
Government
taxation, sustainability responsibility (CSR) initiatives
Social impact, environmental Community programs, sustainability
Community
responsibility efforts

4. Real-World Examples of Stakeholder Management

• Apple Inc.
o Engages suppliers through strict ethical sourcing policies.
o Focuses on customer experience and innovation.
o Maintains strong investor relations with clear financial transparency.
• Unilever
o Integrates sustainability into business operations to meet consumer
and environmental expectations.
o Works closely with governments to ensure compliance with regulations.

5. Conclusion

The SM Model is a crucial framework for businesses to systematically manage

stakeholder relationships, align interests, and ensure long-term success. By
continuously identifying, analyzing, engaging, and monitoring stakeholders,
businesses can build trust, enhance reputation, and drive sustainable growth.