Unit 1

By
Dr. Dipti Singh
Meaning, Nature, Scope, and
Importance of Strategy
• Definition:
• “The determination of the basic long-term goals & objectives of an
enterprise and theadoption of the course of action and the allocation
of resources necessary for carryingout these goals”.-Chandler

• Strategy is an action that managers take to attain one or more of the

organization’s goals. Strategy can also be defined as “A general
direction set for the company and its various components to achieve
a desired state in the future. Strategy results from the detailed
strategic planning process”.
Nature of Strategy
• Strategy is a major course of action through which an organization relates
itself to its environment particularly the external factors to facilitate all
actions involved in meeting the objectives of the organization.
• Strategy is the blend of internal and external factors. To meet the
opportunities and threats provided by the external factors, internal factors
are matched with them.
• Strategy is the combination of actions aimed to meet a particular
condition, to solve certain problems or to achieve a desirable end. The
actions are different for different situations.
• Due to its dependence on environmental variables, strategy may involve a
contradictory action. An organization may take contradictory actions either
simultaneously or with a gap of time. For example, a firm is engaged in
closing down of some of its business and at the same time expanding
some.
The Importance of Strategy
• Provides Direction and Action Plans
• Prioritizes and Aligns Activities
• Defines Accountabilities
• Enhances Communication and Commitment
• Provides a Framework for Ongoing Decision Making
Types of strategy
Strategy can be formulated on three different levels:
· corporate level
· business unit level
· Functional or departmental level.
Corporate Level Strategy
Corporate level strategy fundamentally is concerned with the selection of
businesses in which the company should compete and with the development
and coordination of
that portfolio of businesses.
Corporate level strategy is concerned with:
• Reach - defining the issues that are corporate responsibilities; these might include
identifying the overall goals of the corporation, the types of businesses in which the
corporation should be involved, and the way in which businesses will be integrated
and managed.

• Managing Activities and Business Interrelationships - Corporate strategy seeks to

develop synergies by sharing and coordinating staff and other resources across
business units, investing financial resources across business units, and using business
units to complement other corporate business activities.
Business Unit Level Strategy
.
At the business unit level, the strategic issues are less about the
coordination of operating units and more about developing and sustaining
a competitive advantage for the goods and services that are produced. At
the business level, the strategy
formulation phase deals with;
 Positioning the business against rivals
 Anticipating changes in demand and technologies and adjusting the
strategy to accommodate them
Influencing the nature of competition through strategic actions such as
vertical integration and through political actions.
Functional Level Strategy
The functional level of the organization is the level of the operating
divisions and departments. The strategic issues at the functional level
are related to business processes and the value chain. Functional level
strategies in marketing, finance, operations, human resources, and R&D
involve the development and coordination of resources through which
business unit level strategies can be executed efficiently and effectively.
David Model of Strategic
Management Process
• Three-Stage Strategic Management Process
1. Strategy Formulation
2. Strategy Implementation
3. Strategy Evaluation
• Steps in strategic management process
4. Develop Vision and Mission Statements
5. Perform External Audit
6. Perform Internal Audit
7. Establish Long-Term Objectives
8. Generate, Evaluate, and Select Strategies
9. Implement Strategies; Management, Marketing, Finance, R&D Issues
10. Measure and Evaluate Performance
Important Features of Strategic Decision-
Making:
• Strategy vs. Marketing Decisions:
• Long-term focus vs. short-term and technology-driven.
• Emphasis on continuous development.
• High Risk Involved:
• Outcomes appear after several years.
• No guarantee of success; costly failures possible.
• Complex Decision-Making Process:
• Involves numerous factors and contingencies.
• Considers various scenarios, both positive and negative.
• Timelines are Critical:
• Precise planning and scheduling are vital for success.
• Neglecting timelines can lead to failures.
• Preparation for Competitive Responses:
• Changing market dynamics provoke competitors.
• Companies must anticipate and adapt to responses.
• Implementation Challenges:
• Execution while maintaining the original vision is critical.
• Short-term pressures may lead to deviations from the plan.
STRATEGIC PLANNING PROCESS
In today's highly competitive business
environment, budget-oriented planning or
forecast-based planning methods are
insufficient for a large corporation to
survive and prosper. The firm must engage
in strategic planning that clearly defines
objectives and assesses both the internal
and external situation to formulate
strategy, implement the strategy, evaluate
the progress, and make adjustments as
necessary to stay on track.
A simplified view of the strategic planning
process is shown by the following diagram;
 Corporate Governance
• Corporate Governance refers to the system of rules, practices, and
processes by which a company is directed and controlled. It involves
balancing the interests of a company's many stakeholders, such as
shareholders, management, customers, suppliers, financiers,
government, and the community. The primary goals of corporate
governance are to ensure transparency, fairness, accountability, and
responsible decision-making within an organization.

• In an attempt to create a corporation where stockholders' interests are looked

after,many firms have implemented a two-tier corporate hierarchy. On the
first tier is the board of directors: these individuals are elected by the
shareholders of the corporation. On the second tier is the upper
management: these individuals are hired by the board of directors.
Companies Directors: Appointment,
Power
• Appointment of Directors:
• Shareholder Appointment: Directors are typically appointed by the
shareholders of a company. Shareholders often vote to
elect individuals to the board of directors during annual general
meetings (AGMs).
• Initial Directors: In the case of a newly formed company, initial
directors are often named in the company's articles of
incorporation or association. These individuals may be the
company's founders or those who have invested in the business.
• Appointment by Board: In some cases, the existing board of directors
may have the authority to appoint additional directors, subject to
the company's bylaws or articles of incorporation.
 Powers of Directors:
• Management: Directors have the authority to manage the company's operations and make decisions on behalf
of the company. They oversee the company's strategic direction and ensure that it operates in accordance with
its stated mission and goals.
• Policy Decisions: Directors are responsible for making policy decisions that guide the company's activities. They
may set financial, operational, and ethical policies, among others.
• Hiring and Firing of Executives: Directors often have the power to hire and, if necessary, terminate top-level
executives, including the CEO and other officers.
• Financial Decisions: Directors have control over the company's finances. They may approve budgets,
investments, and major financial transactions.
• Legal and Regulatory Compliance: Directors are responsible for ensuring the company complies with all
relevant laws and regulations. They must act in the best interests of the company and its shareholders.
• Dividend Declarations: Directors may declare dividends to be paid to shareholders, subject to the company's
financial health and applicable laws.
• Strategic Planning: Directors participate in strategic planning processes, including decisions related to mergers
and acquisitions, expansion, and diversification.
• Accountability: Directors are accountable to the company's shareholders and must act in good faith and with
due diligence. They can be held legally liable for breaches of their fiduciary duties.
Corporate Social Reporting
• India is the first country in the world to make corporate social
responsibility (CSR) mandatory, following an amendment to
The Company Act, 2013 in April 2014. Businesses can invest their
profits in areas such as education, poverty, gender equality, and
hunger.
• Customers;
• Suppliers;
• Environment;
• Communities; and,
• Employees.
Business Policy
1. Specific: Policies should be clear and specific to avoid confusion during
implementation.
2. Clear: Policies must be written in plain language without ambiguity or jargon to
prevent misunderstandings.
3. Reliable/Uniform: Policies should provide consistent guidelines that can be
easily followed by subordinates.
4. Appropriate: Policies should align with the organization's current goals and
objectives.
5. Simple: Policies should be straightforward and easily understood by all
members of the organization.
6. Inclusive/Comprehensive: Policies should cover a wide range of relevant issues
to have a broad scope of application.
7. Flexible: Policies should allow for some degree of flexibility in their application
to accommodate different situations without frequent changes.
Process of Strategic Management
and Levels at which Strategy
Operates
Strategic intent: Vision, Mission,
Business definition, Goals and
Objectives
1. Vision – Vision implies the blueprint of the company’s future position. It
describes where the organization wants to land. It is the dream of the
business and an inspiration, base for the planning process. It depicts
the company’s aspirations for the business and provides a peep of
what the organization would like to become in future. Every single
component of the organization is required to follow its vision.
2. Mission – Mission delineates the firm’s business, its goals and ways to reach
the goals. It explains the reason for the existence of business. It is
designed to help potential shareholders and investors understand the
purpose of the company. A mission statement helps to identify, ‘what
business the company undertakes.’ It defines the present capabilities,
activities, customer focus and business makeup.
3. Business Definition – It seeks to explain the business undertaken by the firm,
with respect to the customer needs, target audience, and
alternative technologies. With the help of business definition, one can
ascertain the strategic business choices. The corporate restructuring also
depends upon the business definition.
4. Business Model – Business model, as the name implies is a strategy for the
effective operation of the business, ascertaining sources of income,
desired customer base, and financing details. Rival firms, operating
in the same industry relies on the different business model due to their
strategic choice.
5. Goals and Objectives – These are the base of measurement. Goals are the end
results, that the organization attempts to achieve. On the other
hand, objectives are time-based measurable actions, which help
in the accomplishment of goals. These are the end results which are
to be attained with the help of an overall plan, over the particular
period.