UNIT 1

What Is Strategic Management?

Strategic management is the management of an organization’s resources to achieve its
goals and objectives.
Strategic management involves setting objectives, analyzing the competitive
environment, analyzing the internal organization, evaluating strategies, and ensuring
that management rolls out the strategies across the organization.
KEY TAKEAWAYS
• Companies, universities, nonprofits, and other organizations can use strategic
management as a way to make goals and meet objectives.
• Flexible companies may find it easier to make changes to their structure and
plans, while inflexible companies may chafe at a changing environment.
• A strategic manager may oversee strategic management plans and devise ways
for organizations to meet their benchmark goals.
**Strategic management is the process of setting goals, procedures, and objectives in
order to make a company or organization more competitive. Typically, strategic
management looks at effectively deploying staff and resources to achieve these goals.
Often, strategic management includes strategy evaluation, internal organization
analysis, and strategy execution throughout the company.
MEANING OF STRATEGY
The strategy is defined as a plan deployed at each level of management for the
attainment of objective and realization of long-term goals of the organization. It is a set
of coherent actions which are performed in order to gain a sustainable is a set of
coherent actions which are performed in order to gain a sustainable competitive
advantage. The term strategy was primarily used in military and was later adapted to the
field of business and management. It was derived from a Greek word ‘Strategos’, where
‘Stratos’ means army and ‘agos’ implies to lead.
In management, the concept of strategy is taken in broader terms. Strategies are used
to acquire a competitive advantage over others in any field. There can be general or
specific strategies depending upon the situation. Organization deploys strategies for
several purposes such as for satisfying customers, surviving in the market, expanding
the business, improving market share, increasing profitability and ultimately to attain
objectives of the organization.
According to Glueck, “Strategy is the unified, comprehensive and integrated plan
that relates the strategic advantage of the organization to the challenges of the
environment and is designed to ensure that basic objectives of the enterprise are
achieved through proper implementation process.”
It lays stress on the following:

• Unified comprehensive and integrated plan;

• challenges of environment;

• proper implementation for achieving basic objectives.

Strategies are used as a response to the change in environment. They are adopted in
accordance with the strength and weakness of the organization. The main aim of
framing strategies is to seek out the opportunities favoured by the external environment
and mitigate the threats simultaneously. The organization can adopt strategies to
achieve the desired position in the industry. There are number of definitions given by
different experts at different point of time. One such definition relates strategy to its
environment. It says “Strategy is organization’s pattern of response to its environment
over a period of time to achieve its goals and mission.”
This definition lays stress on the following:

• Organization’s pattern of response to its environment;

• Achieving goals and mission.

However, various experts do not agree about the precise scope of strategy. Lack of
consensus has led to two broad categories of definitions: strategy as action inclusive of
objective setting and strategy as action exclusive of objective setting.
CONCEPT OF STRATEGIC
Strategic Management is concerned with the effective deployment of business
strategies for the achievement of the organizational objectives for the purpose of
reaching the desired goal. Strategic management involves making strategic decisions at
various levels of the organization. However, strategic decisions are taken at the top level
of management and then transferred to lower level management. These decisions are
related to moving from the present state of an organization to a future state. It basically
develops a framework within which an organization functions. In other words, strategic
management defines organizational capability, forms of value addition and the purpose
of the existence of an organization.
Strategic management:

• is a medium and long-term process;

• begins with the formulation of a desirable future position for the organization, followed
by decisions regarding what is at the core of the organization;

• setting up targets for reaching the future state;

• enables an organization to obtain an edge over its competitors in the market by

analyzing the resources available with the organization;
• is formulating strategies for effective and efficient utilization of resources;

• matches the organizational capabilities with the environmental opportunities;

• is futuristic and organization wide process.

Therefore, we can say that strategic management is the process of formulation and
implementation of strategies lying within the boundaries of the organizational resources
in response to the environmental opportunities and threats so as to achieve sustainable
competitive advantage over competitors.
Dimensions of Strategic Decisions
6 Major Dimensions of Strategic Decisions
1. Strategic issues require top-management decisions:
Strategic issues involve thinking in totality of the organization’s objectives in which a
considerable amount of risk is involved. Hence, problems calling for strategic decisions
require to be considered by the top management.
2. Strategic issues involve the allocation of large amounts of company resources:
It may require either a huge financial investment to venture into a new area of business
or the organization may require a huge amount of manpower with new skill sets.
3. Strategic issues are likely to have a significant impact on the long term prosperity
of the firm:
Generally the results of strategic implementation are seen on a long term basis and not
on immediate terms.
4. Strategic issues are future oriented:
Strategic thinking involves predicting the future environmental conditions and how to
orient for the changed conditions.
5. Strategic issues usually have major multifunctional or multi- business
consequences:
As they involve organization in totality they affect different sections of the organization
with varying degree.
6. Strategic issues necessitate consideration of factors in the firm’s external
environment:
Strategic focus in an organization involves orienting its internal environment to the
changes of external environment.

LEVELS OF STRATEGY
It is believed that strategic decision making is the responsibility of top management.
However, it is considered useful to distinguish between the levels of operation of the
strategy. Strategy operates at different levels. These are:

• Corporate Level

• Business Level

• Functional Level

There are basically two categories of organizations- one, which have different
businesses organized at different directions or product groups known as profit centres
or strategic business units (SBUs) and other, which consists of organizations which are
single product organizations. The example of first category can be that of an
organization which is a highly integrated producing textile, yarn, and a variety of petro
chemical products and the example of the second category could be an organization
which is engaged in the manufacturing and selling of heavy commercial vehicles. The
SBU concept was introduced by General Electric Organization (GEC) of USA to manage
product business. The fundamental concept in the SBU is the identification of discrete
independent product/ market segments served by the organization.
Features of SBU

• Because of the different environments served by each product, a SBU is created for
each independent product/ segment.

• Each and every SBU is different from another SBU due to the distinct business areas
(DBAs) it is serving.

• Each SBU has a clearly defined product/market segment and strategy. It develops its
strategy according to its own capabilities and needs with overall organizations
capabilities and needs.

• Each SBU allocates resources according to its individual requirements for the
achievement of organizational objectives.

• As against the multi-product organizations, the single product organizations have

single Strategic Business Unit. In these organizations, corporate level strategy serves
the whole business.

• The strategy is implanted at the next lower level by functional strategies. In multiple
product organization, a strategy is formulated for each SBU (known as business level
strategy) and such strategies lie between corporate and functional level strategies.
The three levels are explained below.
Corporate level strategy
At the corporate level, strategies are formulated as per the policies of the organization.
Characteristics

• These are value oriented, conceptual and less concrete than decisions at the other
two levels.

• These are characterized by greater risk, cost and profit potential as well as flexibility.

• Mostly, corporate level strategies are futuristic, innovative and pervasive in nature.

• They occupy the highest level of strategic decision making and cover the actions
dealing with the objectives of the organization. Such decisions are made by top
management of the organization. The example of such strategies includes acquisition
decisions, diversification, structural redesigning etc.

• The board of Directors and the Chief Executive Officer are the primary groups involved
in this level of strategy making.

• In small and family owned businesses, the entrepreneur is both the general manager
and chief strategic manager.
Business level strategy
The strategies formulated by each SBU to make best use of its resources given the
environment it faces, come under the gamut of business level strategies.
Characteristics

• At such a level, strategy is a comprehensive plan providing objectives for SBUs,

allocation of resources among functional areas and coordination between them for
achievement of corporate level objectives.

• These strategies operate within the overall organizational strategies i.e. within the
broad constraints and polices and long term objectives set by the corporate strategy.

• The SBU managers are involved in this level of strategy.

• The strategies are related with a unit within the organization.

• The SBU operates within the defined scope of operations by the corporate level
strategy and is limited by the assignment of resources by the corporate level.

• Business strategy relates with the “how” and the corporate strategy relates with the
“what”.

• Business strategy defines the choice of product or service and market of individual
business within the organization. The corporate strategy has impact on business
strategy.

Functional level strategy

This strategy relates to a single functional operation and the activities involved therein.
This level is at the operating end of the organization.
Characteristics

• The decisions at this level within the organization are described as tactical.

• The strategies are concerned with how different functions of the enterprise like
marketing, finance, manufacturing etc. contribute to the strategy of other levels.

• Functional strategy deals with a relatively restricted plan providing objectives for
specific function, allocation of resources among different operations within the
functional area and coordination between them for achievement of SBU and corporate
level objectives.
Sometimes a fourth level of strategy also exists. This level is known as the operating
level. It comes below the functional level strategy and involves actions relating to
various sub functions of the major function. For example, the functional level strategy of
marketing function is divided into operating levels such as marketing research, sales
promotion etc.
Modes of Strategic Management
Modes of strategic management are the actual kinds of approaches taken by
managers in formulating and implementing strategies. They address the issues of who
has the major influence in the strategic management process and how the process is
carried out. Research indicates that managers tend to use one of three major
approaches to, or modes of strategic management: entrepreneurial, adaptive, and
planning. The mode selected is likely to influence the degree of innovation that occurs
within the organization. Innovation is particularly important in the context of strategic
management, because organizations that do not continually incorporate new ideas are
likely to fail behind competitively, particularly when the environment is changing rapidly.
1. Entrepreneurial Mode
“Entrepreneurial mode is an approach in which strategy is formulated mainly by a
strong visionary chief executive who actively searches for new opportunities, is heavily
oriented toward growth, and is willing to make bold strategies rapidly” (Management,
Kathryn M. Bartol & David C. Martin). The entrepreneurial searches for new mode are
most likely to be found in organizations that are young or small, have a strong leader, or
are in such serious trouble that bold are their only hope. Not surprisingly, in the
entrepreneurial mode, the extent to which the strategic management process
encourages innovation depends largely on the orientation of top leaders. Their
personalities, power, and information enable them to overcome obstacles and push for
change. Conversely, strong leaders also are in a position to threat innovative activities,
should they be so inclined.
2. Adaptive Mode
“Adaptive mode is an approach to strategy formulation that emphasizes taking small
incremental steps, reacting to problems rather than seeking opportunities, and
attempting to satisfy a number of organizational power groups” (Management, Kathryn
M. Bartol & David C. Martin). The adaptive mode is most likely to be used by managers in
established organizations that face a rapidly changing environment and yet have several
coalitions, or power blocks, that make it difficult to obtain agreement on clear strategic
goals and associated long-term plans. For example, before London-based Grand
Metropolitan PLC purchased Pillsbury, including the Burger King Chain, the chain was
plagued by constant turnover, marketing problems, inconsistent service, and angry
franchisees who frequently told Pillsbury what to do. Grand Metropolitan is now
working to put the chain back on track through a strategy that emphasizes, doing
“whatever it takes to create a positive, memorable experience.” Concrete measures
include increasing the number of field representatives who visit Burger King stores,
highlighting cleanliness, and rewarding employees who take the initiative in improving
service by doing things differently.
With the adaptive approach, the degree of innovation fostered by the strategic
management process is likely to depend on the ability of managers to agree on at least
some major goals and basic strategies that set essential directions. In addition, lower-
level managers must have some flexibility in carrying out the basic strategy rather than
being given extremely detailed plans to follow; this approach might be effective in a
more stable environment or one in which agreement among coalitions is easy to obtain.
Without at least some agreement among high-level managers on major goals and
directions, however the adaptive mode may be ineffective in moving the organization in
viable strategic directions.
3. Planning Mode

Planning mode is an approach to strategy formulation that involves systematic,

comprehensive analysis, along with integration of various decisions and strategies”
(Management, Kathryn M. Bartol & David C). Martin. With the planning mode, executives
often utilize planning specialists to help with the strategic management process. The
ultimate aim of the planning mode is to understand the environment well enough to
influence it. The planning mode is most likely to be used in large organizations that have
enough resources to conduct comprehensive analysis, have an internal situation in
which agreement is possible on major goals, and face an environment that has enough
stability to enable the formulation and implementation of carefully conceived
strategies. For example, Disney’s plans include entry into the convention hotel business
with its Dolphin Hotel, operated by the Sheraton Corporation, and Swan Hotel, run by
the Westin Hotel Company. Combined, the two hotels offer 2350 rooms and more than
200,000 square feet of convention space inside Disney World. The hotels were heavily
booked well in advance of their opening in 1990.
With the planning mode, innovation is most likely to occur when strategies explicitly
articulate needs for product and service innovation and when top-level managers, such
as those at Disney, help integrate efforts in the direction of encouraging innovation.

Overview of process of strategic planning & management.

Strategic planning and management is a systematic process that organizations
undertake to set goals, make decisions, allocate resources, and chart a course of action
to achieve long-term success. Here's an overview of the process:

1. Mission and Vision Definition: This is the foundational step where the organization
defines its purpose (mission) and its aspirations for the future (vision). The mission
outlines what the organization does, who it serves, and why it exists, while the vision
describes what the organization hopes to achieve in the long term.

2. Environmental Analysis: Organizations conduct an analysis of the internal and

external environment to identify opportunities and threats. This includes assessing
factors such as market trends, competition, regulatory changes, technological
advancements, and internal capabilities.

3. SWOT Analysis: Based on the environmental analysis, organizations conduct a

SWOT analysis to identify their strengths, weaknesses, opportunities, and threats. This
helps in understanding the internal resources and capabilities as well as external
factors that could impact the organization's ability to achieve its objectives.

4. Goal Setting: Organizations establish specific, measurable, achievable, relevant,

and time-bound (SMART) goals aligned with their mission, vision, and environmental
analysis. These goals provide a clear direction for the organization and serve as
benchmarks for performance evaluation.

5. Strategy Formulation: Once goals are established, organizations develop strategies

to achieve them. This involves identifying the actions, initiatives, and resource
allocations necessary to move the organization towards its goals. Strategies may involve
expanding into new markets, developing new products or services, improving
operational efficiency, or enhancing competitive positioning.
6. Implementation Planning: This step involves developing detailed plans and tactics for
executing the chosen strategies. It includes determining responsibilities, timelines,
budgets, and performance metrics. Effective implementation planning ensures that
resources are allocated efficiently and that progress can be monitored and measured.

7. Execution: With the plans in place, organizations begin executing the strategies and
actions outlined in the implementation plans. This involves mobilizing resources,
coordinating activities, and monitoring progress towards achieving the established
goals.

8. Performance Monitoring and Control: Throughout the strategic planning and

management process, organizations continuously monitor performance against
established goals and targets. This involves collecting data, analyzing results, and
making adjustments as needed to stay on track and adapt to changing circumstances.

9. Evaluation and Feedback: At regular intervals, organizations evaluate the

effectiveness of their strategies and performance against objectives. This may involve
conducting formal reviews, soliciting feedback from stakeholders, and assessing the
impact of actions taken. Based on the evaluation, organizations may refine their
strategies, reallocate resources, or revise their goals as necessary.

10. Strategic Review and Renewal : Strategic planning and management is an ongoing
process. Periodically, organizations conduct comprehensive reviews to assess their
progress, reassess their mission, vision, and goals, and adjust their strategies
accordingly. This ensures that the organization remains agile and responsive to changes
in its environment and continues to pursue long-term success.