• 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”.
• A strategy is all about integrating organizational
activities and utilizing and allocating the scarce
resources within the organizational environment
so as to meet the present objectives.
• While planning a strategy it is essential to
consider that decisions are not taken in a vaccum
and that any act taken by a firm is likely to be met
by a reaction from those affected, competitors,
customers, employees or suppliers.
• Strategy can also be defined as knowledge of the
goals, the uncertainty of events and the need to
take into consideration the likely or actual
behavior of others.
• Strategy is the blueprint of decisions in an
organization that shows its objectives and goals,
reduces the key policies, and plans for achieving
these goals, and defines the business the
company is to carry on, the type of economic
and human organization it wants to be, and the
contribution it plans to make to its
shareholders, customers and society at large.
• Strategy is a well defined roadmap of an
organization. It defines the overall mission(It
describes why an organization is operating
and thus provides a framework within which
strategies are formulated. It describes what
the organization does (i.e., present
capabilities), who all it serves (i.e.,
stakeholders) and what makes an
organization unique (i.e., reason for
existence).,
• vision (A vision statement identifies where the
organization wants or intends to be in future or
where it should be to best meet the needs of the
stakeholders. It describes dreams and aspirations
for future.For instance, Microsoft’s vision is “to
empower people through great software, any
time, any place, or any device.” Wal-Mart’s
vision is to become worldwide leader in
retailing.) and direction of an organization. The
objective of a strategy is to maximize an
organization’s strengths and to minimize the
strengths of the competitors.
• Strategy, in short, bridges the gap between
“where we are” and “where we want to be”.
 MANAGEMENT
• A'Management is a distinct process consisting
of planning, organising, actuating and
controlling; utilising in each both science and
art, and followed in order to accomplish
pre-determined objectives.“ - George R Terry
STRATEGIC MAMANGEMENT
 Strategic Management is a stream of decisions
and actions which lead to the development of an
effective strategy or strategies to help achieve
corporate objectives. The Strategic Management
process is the way in which strategists
determine objectives and make strategic
decisions. Strategic Management can be found
in various types of organizations, business,
service, cooperative, government, and the like.
 According to Teece – Strategic management
can be defined as the formulation,
implementation, and evaluation of managerial
actions that enhance the value of a business
enterprise.
 Nature of Strategic Management

Top management involvement : Strategic management relates to several

areas of a firm’s operations. So, it requires top management’s
involvement.Generally, only the top management has the perspective
needed to understand the broad implications of its decisions and the
power to authorise the necessary resource allocations.

Requirement of large amounts of resources

• Strategic management requires the commitment of the firm to actions
over an extended period of time. So, they require substantial resources,
such as physical assets, 20 manpower etc.
• Example: Decisions to expand geographically would have significant
financial implications in terms of the need to build and support a new
customer base.
Affect the firms long-term prosperity
• Once a firm has committed itself to a particular strategy, its image and
competitive advantage are tied to that strategy; its prosperity is
dependent upon such a strategy for a long time.
 Future-oriented
• Strategic management encompasses forecasts, what is anticipated
by the managers. In such decisions, the emphasis is on the
development of projections that will enable the firm to select the
most promising strategic options.
• In the turbulent environment, a firm will succeed only if it takes a
proactive stance towards change.
Multi-functional or multi-business consequences
• Strategic management has complex implications for most areas of
the firm. They impact various strategic business units especially in
areas relating to customer-mix, competitive focus, organisational
structure etc.
• All these areas will be affected by allocations or reallocations of
responsibilities and resources that result from these decisions.
• Strategic Management can be defined as the art &
science of formulating, implementing, and evaluating,
cross-functional decisions that enable an organisation
to achieve its objectives.

• Strategic management nature is different from other

aspects of management. An individual manager is
most often required to deal with problems of
operational nature. He generally focuses on
day-to-day problems such as the efficient production
of goods, the management of a sales force, the
monitoring of financial performance or the design of
some new system that will improve the level of
customer service.
 Need for Strategic Management

Strategic management provides the route map for the firm. It makes it possible for the firm to
take decisions concerning the future with a greater awareness of their implications. It provides
direction to the company; it indicates how growth could be achieved.

It helps the firm to be more proactive than reactive.

It provides the roadmap for the firm.

It allows the firm to anticipate change and be prepared to manage it.

It helps the firm to respond to environmental changes in a better way.

It minimizes the chances of mistakes and unpleasant surprises.

It provides clear objectives and direction for employees.

Components of Strategic
Management Process
 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.
Environmental Scanning - Internal &
External Analysis of Environment
Organizational environment consists of both external and internal
factors. Environment must be scanned so as to determine development
and forecasts of factors that will influence organizational success.

Environmental scanning refers to possession and utilization of

information about occasions, patterns, trends, and relationships
within an organization’s internal and external environment.

It helps the managers to decide the future path of the organization.

Scanning must identify the threats and opportunities existing in the
environment.

During strategy formulation, an organization must take advantage of the

opportunities and minimize the threats. A threat for one organization
may be an opportunity for another.
• Internal analysis of the environment is the first step
of environment scanning. Organizations should
observe the internal organizational environment.
• This includes employee interaction with other
employees, employee interaction with management,
manager interaction with other managers, and
management interaction with shareholders, access to
natural resources, brand awareness, organizational
structure, main staff, operational potential, etc. Also,
discussions, interviews, and surveys can be used to
assess the internal environment.
• Analysis of internal environment helps in
identifying strengths and weaknesses of an
organization.
• As business becomes more competitive, and there
are rapid changes in the external environment,
information from external environment adds
crucial elements to the effectiveness of long-term
plans.
• As environment is dynamic, it becomes essential
to identify competitors’ moves and actions.
Organizations have also to update the core
competencies and internal environment as per
external environment.
• While in external analysis, three correlated environment should
be studied and analyzed —

Examining the industry environment needs an appraisal of the

competitive structure of the organization’s industry, including the
competitive position of a particular organization and it’s main
rivals. Also, an assessment of the nature, stage, dynamics and
history of the industry is essential. It also implies evaluating the
effect of globalization on competition within the industry.

Analyzing the national environment needs an appraisal of

whether the national framework helps in achieving competitive
advantage in the globalized environment.
Analysis of macro-environment includes exploring
macro-economic, social, government, legal,
technological and international factors that may
influence the environment. The analysis of
organization’s external environment reveals
opportunities and threats for an organization.

Strategic managers must not only recognize the

present state of the environment and their
industry but also be able to predict its future
positions.
Steps in Strategy Formulation Process

• Strategy formulation refers to the process of

choosing the most appropriate course of action
for the realization of organizational goals and
objectives and thereby achieving the
organizational vision.
• The process of strategy formulation basically
involves six main steps. Though these steps do
not follow a rigid chronological order, however
they are very rational and can be easily followed
in this order.
1. Setting Organizations’ objectives - The key component of any
strategy statement is to set the long-term objectives of the
organization. It is known that strategy is generally a medium for
realization of organizational objectives.
Objectives stress the state of being there whereas Strategy
stresses upon the process of reaching there.
Strategy includes both the fixation of objectives as well the
medium to be used to realize those objectives. Thus, strategy is a
wider term which believes in the manner of deployment of
resources so as to achieve the objectives.
While fixing the organizational objectives, it is essential that the
factors which influence the selection of objectives must be
analyzed before the selection of objectives. Once the objectives
and the factors influencing strategic decisions have been
determined, it is easy to take strategic decisions.
2. Evaluating the Organizational Environment - The next step is to
evaluate the general economic and industrial environment in
which the organization operates. This includes a review of the
organizations competitive position.
It is essential to conduct a qualitative and quantitative review of
an organizations existing product line. The purpose of such a
review is to make sure that the factors important for competitive
success in the market can be discovered so that the management
can identify their own strengths and weaknesses as well as their
competitors’ strengths and weaknesses.
After identifying its strengths and weaknesses, an organization
must keep a track of competitors’ moves and actions so as to
discover probable opportunities of threats to its market or supply
sources.
3. Setting Quantitative Targets - In this step, an
organization must practically fix the quantitative target
values for some of the organizational objectives. The
idea behind this is to compare with long term customers,
so as to evaluate the contribution that might be made by
various product zones or operating departments.

4. Aiming in context with the divisional plans - In this step,

the contributions made by each department or division
or product category within the organization is identified
and accordingly strategic planning is done for each
sub-unit. This requires a careful analysis of
macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering
and analyzing the gap between the planned or desired
performance.
• A critical evaluation of the organizations past performance,
present condition and the desired future conditions must be done
by the organization.
• This critical evaluation identifies the degree of gap that persists
between the actual reality and the long-term aspirations of the
organization. An attempt is made by the organization to estimate
its probable future condition if the current trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy
Formulation. The best course of action is actually chosen after
considering organizational goals, organizational strengths,
potential and limitations as well as the external opportunities.
Strategy Implementation and its Steps
• Strategy implementation is the translation of chosen strategy into
organizational action so as to achieve strategic goals and objectives.
Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational
structure, control systems, and culture to follow strategies that lead to
competitive advantage and a better performance.

• Organizational structure allocates special value developing tasks and roles

to the employees and states how these tasks and roles can be correlated
so as maximize efficiency, quality, and customer satisfaction-the pillars of
competitive advantage. But, organizational structure is not sufficient in
itself to motivate the employees.
• An organizational control system is also required. This control system
equips managers with motivational incentives for employees as well as
feedback on employees and organizational performance. Organizational
culture refers to the specialized collection of values, attitudes, norms and
beliefs shared by organizational members and groups.
 Following are the main steps in
implementing a strategy:
1. Developing an organization having potential of carrying out
strategy successfully.
2. Disbursement of abundant resources to strategy-essential
activities.
3. Creating strategy-encouraging policies.
4. Employing best policies and programs for constant
improvement.
5. Linking reward structure to accomplishment of results.
6. Making use of strategic leadership.
7. Excellently formulated strategies will fail if they are not properly
implemented. Also, it is essential to note that strategy
implementation is not possible unless there is stability between
strategy and each organizational dimension such as
organizational structure, reward structure, resource-allocation
process, etc.
• Strategy implementation poses a threat to many
managers and employees in an organization. New
power relationships are predicted and achieved.
New groups (formal as well as informal) are
formed whose values, attitudes, beliefs and
concerns may not be known. With the change in
power and status roles, the managers and
employees may employ confrontation behaviour.
•
Strategy Formulation Strategy Implementation
Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making involved in developing related to executing the strategic plans.
organization’s strategic goals and plans

In short, Strategy Formulation is placing the In short, Strategy Implementation is managing forces
Forces before the action. during the action.

Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly

Activity based on strategic decision-making. an Administrative Task based on strategic and
operational decisions.

Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.

Strategy Formulation is a rational process. Strategy Implementation is basically an operational

process.

Strategy Formulation requires co-ordination among Strategy Implementation requires co-ordination

few individuals. among many individuals.

Strategy Formulation requires a great deal Strategy Implementation requires

of initiative and logical skills. specific motivational and leadership traits.

Strategic Formulation precedes Strategy Strategy Implementation follows Strategy

 Strategy Evaluation Process and its
Significance
• Strategy Evaluation is as significant as strategy formulation
because it throws light on the efficiency and effectiveness of the
comprehensive plans in achieving the desired results.
• The managers can also assess the appropriateness of the current
strategy in todays dynamic world with socio-economic, political
and technological innovations. Strategic Evaluation is the final
phase of strategic management.
• The significance of strategy evaluation lies in its capacity to
co-ordinate the task performed by managers, groups,
departments etc, through control of performance.
• Strategic Evaluation is significant because of various factors such
as - developing inputs for new strategic planning, the urge for
feedback, appraisal and reward, development of the strategic
management process, judging the validity of strategic choice etc.
 The process of Strategy Evaluation
consists of following steps-
1. Fixing benchmark of performance - While fixing the benchmark,
strategists encounter questions such as - what benchmarks to set, how
to set them and how to express them.

In order to determine the benchmark performance to be set, it is essential

to discover the special requirements for performing the main task.
The performance indicator that best identify and express the special
requirements might then be determined to be used for evaluation.
The organization can use both quantitative and qualitative criteria for
comprehensive assessment of performance. Quantitative criteria includes
determination of net profit, ROI, earning per share, cost of production,
rate of employee turnover etc.
Among the Qualitative factors are subjective evaluation of factors such as
- skills and competencies, risk taking potential, flexibility etc.
2. Measurement of performance - The standard performance is a bench mark with
which the actual performance is to be compared. The reporting and communication
system help in measuring the performance.

• If appropriate means are available for measuring the performance and if the
standards are set in the right manner, strategy evaluation becomes easier. But
various factors such as managers contribution are difficult to measure.

• Similarly divisional performance is sometimes difficult to measure as compared to

individual performance. Thus, variable objectives must be created against which
measurement of performance can be done.

• The measurement must be done at right time else evaluation will not meet its
purpose. For measuring the performance, financial statements like - balance sheet,
profit and loss account must be prepared on an annual basis.
3. Analyzing Variance - While measuring the actual performance and
comparing it with standard performance there may be variances
which must be analyzed.

The strategists must mention the degree of tolerance limits

between which the variance between actual and standard
performance may be accepted.

The positive deviation indicates a better performance but it is

quite unusual exceeding the target always. The negative
deviation is an issue of concern because it indicates a shortfall in
performance.

Thus in this case the strategists must discover the causes of

deviation and must take corrective action to overcome it.
4. Taking Corrective Action - Once the deviation in performance is identified,
it is essential to plan for a corrective action.

If the performance is consistently less than the desired performance, the

strategists must carry a detailed analysis of the factors responsible for
such performance.

If the strategists discover that the organizational potential does not match
with the performance requirements, then the standards must be lowered.

Another rare and drastic corrective action is reformulating the strategy

which requires going back to the process of strategic management,
reframing of plans according to new resource allocation trend and
consequent means going to the beginning point of strategic management
process.
• Example : In order to expand his limited furniture business,
Alex plans to add a new product category that includes all
home decor items. He is doubtful, though, of how his brand
would do because it took him years to build up his furniture
company because he was slow to recognise the drawbacks.
He performs a SWOT (Strengths, Weaknesses,
Opportunities, and Threats) study as part of the strategic
management in order to minimise risk this time.
• He identifies the advantages and disadvantages of doing
business. In accordance with the present market trend, he
also assesses possible opportunities and dangers. As a
result, he plans and strategies the procedures, from
manufacturing to advertising, making sure to give the
proper resources to the appropriate locations.
An example of the strategic management process is when a company decides
when and where to open a new branch office. The company must first conduct
environmental scanning to see what factors the company should anticipate.
Strategy formulation uses the environmental factors analyzed to formulate a
strategy for the branch move. Strategy implementation is executing the strategy
decided upon, such as the location, moving arrangements, and grand opening
target date. Strategy evaluation and control is when the company sets key
deliverable dates throughout the process to ensure the move progresses on
schedule and stays on schedule.