Introduction to Strategy and

Strategic Management.
 Strategy is a set of goal-directed actions a firm takes to gain and
sustain superior performance relative to competitors. To achieve
superior performance, companies compete for resources. A strategy
is good when it enables a firm to achieve superior performance.

It consists of 3 elements

a diagnosis of the a guiding policy to a set of coherent

competitive address the actions to
challenge competitive implement a firm’s
challenge guiding policy
Strategic managers should remember that
strategy is neither about making great
statements nor being able to face a competitive
challenge.
All these elements may be a necessary part of a
firm’s functional and global initiatives to
support its competitive strategy, but these
elements are not sufficient to achieve
competitive advantage.
1. A firm’s competitive advantage is always relative, not absolute.
2.To assess competitive advantage, we compare firm’s performance to a benchmark
that is, either the performance of other firms in the same industry or an industry
average.

3.A firm that achieves superior performance relative to other competitors in the same
industry or the industry average has a competitive advantage.

4.A firm that is able to outperform its competitors or the industry average over a
prolonged period has a sustainable competitive advantage.

5.If a firm underperforms its rivals or the industry average, it has a competitive
disadvantage.

6. Two or more firms that perform at the same level have competitive parity.
An effective strategy requires that strategic trade-offs be recognized and addressed—
for example, between value creation and the costs to create the value.
Strategy is not just the preserve of top management

Middle and lower level managers have to work within

their organization's strategy, meeting the objectives set
by the strategy and observing the constraints.
Managers have to communicate strategy to their teams,
and will achieve greater performance from them the
more convincing they are in interpreting it. Indeed,
middle and lower-level managers can increasingly play a
part in shaping strategy.
 STRATEGY
The term strategy is derived from the Greek word
strategia, meaning “generalship’. Although the word is
Greek, yet the concept has its origins from the classic,
The Art of War, written by Sun Tzu written about 500 BC.
Strategy may be defined as the direction and scope of an
organisation over the long term, which achieves
advantage for the organisation through the configuration
of resources within a changing environment and to fulfill
stakeholder expectations.
Strategy is likely to be concerned with the long term direction of an
organisation.

Strategic decisions are normally about trying to achieve some advantage for
the organisation over competition.

Strategic decisions are concerned with the scope of the organization's

activities

Strategy can be seen as stretching an organization's resources and

competences to create new opportunities or to capitalise on them.
Strategies may require major resource changes for an organisation

• Strategy can be seen as matching the resources and activities to the

environment in which it operates

• Strategic decisions are likely to affect operational decisions.

• The strategy of an organisation is affected not only by environmental forces and

resource availability but also by the values and expectations of those who have
power in and around the organisation.
 Consequence of characteristic of strategy or strategic
decisions
 Strategic Decisions are likely to be complex in nature.
 Likely to be made in situations of uncertainty.
 Likely to demand an integrated approach.
Manage change relationships and networks outside the
organisation.
Strategic Decisions will very often involve change in
organisations
A typical business firm usually considers three types of
strategy

FUNCTIONAL OR
CORPORATE BUSINESS
OPERATIONAL LEVEL
STRATEGY STRATEGY
STRATEGY
 CORPORATE STRATEGY

It is concerned with the overall purpose and scope of an

organisation and how value will be added to the different
parts (business units) and product lines of the
organisation.
Corporate strategies typically fit within the three main
categories of stability, growth and retrenchment.
Decisions include investment in diversification, vertical
integration, acquisitions, new ventures, the allocation of
resources between the different businesses of the firm
and divestments.
 BUSINESS STRATEGY

It is about how to compete successfully in particular

markets.
It emphasizes improvement of the competitive position of
a organization's products or services in the specified
industry or market segment served by that business unit.
These strategies fit within the two overall categories
namely, competitive and cooperative strategies.
 FUNCTIONAL OR OPERATIONAL LEVEL
STRATEGY
It is concerned with how the component parts of an
organisation deliver effectively the corporate and business
level strategies in terms of resources, processes and
people.
It is concerned with developing and nurturing
competence to provide a business unit with a competitive
advantage.
These strategies are taken at the functional level directed
towards maximizing resource productivity.
 STRATEGIC MANAGEMENT

It refers to a set of managerial decisions and actions that

determines the long term performance of an organisation.
Originally called ‘corporate planning’, the shift from
‘corporate planning’ to what became termed as ‘strategic
management’ was associated with increasing focus on
competition as the central characteristic of the business
environment and competitive advantage as the primary
goal of strategy.
 STEPS OF STRATEGIC MANAGEMENT PROCESS
ENVIRONMENTAL STRATEGY
SCANNING IMPLEMENTATION

STRATEGY EVALUATION AND

FORMULATION CONTROL
 ENVIRONMENTAL SCANNING

It refers to the monitoring, evaluating and disseminating

of information from the external and internal
environments to key people within the organisation.
The purpose is to identify the strategic factors both
internal and external elements that will shape the future
of the organisation.
The range of methods and techniques available for
environmental scanning is wide.
 STRATEGY FORMULATION

 Also, known as Strategic Alternatives and Choices .

It refers to the development of long range plans for the
effective management of environmental opportunities and
threats, in the light of corporate strengths and weaknesses
(SWOT). It includes defining the mission, setting objectives,
developing strategies and setting policy guidelines.
 STRATEGY IMPLEMENTATION
It is the process by which strategies and policies are put into
practice though the development of programs, budgets and
procedures.
This includes day to day decisions in resource allocation and
is typically conducted by the middle and lower level managers
with review by the top management.
It involves taking actions at the functional, business and
corporate levels to execute a strategic plan. Implementation
include, for example, putting quality improvement programs,
changing the way product is designed, positioning the
product differently, market segmentation, expanding through
mergers and acquisitions and downsizing the company.
 EVALUATION AND CONTROL

It involves the process through which organizational

activities and performances are monitored.
The actual performances are compared to the desired
performances and corrective actions are taken to resolve
problems.
The process of evaluation and control helps to identify the
weakness and lacunae of the previously implemented
strategic plan and thereby, stimulates the entire process to
begin again.
Alignment of Strategy with
Vision , Mission and Culture
 VISION
• It is the desired future state of an organisation
• It is an aspiration around which a strategist, perhaps a chief
executive, might seek to focus the attention and energies of
members of the organisation.
• It is a vividly descriptive image of what a company wants to
become in the future.
 A number of organisations have summed up their
visions in a brief phrase for e.g.:
• Nike: ‘To bring innovation and inspiration to every athlete in the world.’
• Scotland Yard: ‘to make London the safest major city in the world.’
• Dabur: ‘Dedicated to the health and well being of every household.’
• Infosys: ‘To be a globally respected organisation that provides best-of- breed business
solutions, leverage technology, delivered by best- in class people.’
• Amazon: ‘To be Earth’s most customer-centric company, where customers can find and
discover anything they might want to buy online.’
• Facebook: ‘To make the world more open and connected.’
• GE: ‘To move, cure, build, and power the world.’
• Tesla: ‘To accelerate the world’s transition to sustainable energy.’
• Walmart: ‘To be the best retailer in the hearts and minds of consumers and employees.’
 THE BENEFITS OF HAVING A VISION
• As mentioned by Azhar (2008) organization's having a good
vision enjoys the following benefits:
• Good visions are inspiring and exhilarating.
• Vision represents a discontinuity, a step function and a jump
ahead so that the company knows what it is to be.
• Good vision helps in the creation of a common identity and a
shared sense of purpose.
• Good visions are competitive, original and unique. The make
sense in the market place as they are practical.
• Good visions foster risk taking and experimentation.
• Good visions foster long term thinking
• Good visions represent integrity: they are truly genuine and can be
used to the benefit of the people.
• The visions are customer-oriented.
• Internal stakeholders are invested in defining the vision.
Organizational structures such as compensation systems align with
the firm’s vision statement.
 MISSION
• A company’s mission describes its purpose and its present business
(who we are? what we do? and why we are here?).
• It announces what the company is providing to society; either a
service or a product
• A mission statement may also include the firm’s values and
philosophy about how it does business and treats its employees;
however, that is usually better kept as a separate document. In
simple terms, a mission statement promotes a sense of shared
expectations in employees and communicates a public image to
important stakeholder groups in the company’s task environment
• The first step in the strategy making process involves
selecting the corporate mission and major corporate goals
• The mission statement of an organisation can be either
product oriented or customer oriented. A product-oriented
business definition focuses on the characteristics of the
products sold and the markets served, not on which kinds
of customer needs the products are satisfying.
• A customer –oriented view of a company’s business focuses
on customer needs rather than a particular product (or
solution) for satisfying those needs
 Mission Statement of some organisations
and the nature of the statement:
 Alibaba: ‘To make it easy to do business anywhere.’
 Better World Books: ‘To harness the power of capitalism to bring literacy and
opportunity to people around the world.’
Google: ‘To organize the world’s information and make it universally accessible
and useful.’
 SpaceX: ‘To make human life multi planetary’.
 ORGANISATIONAL CULTURE
• Organizational culture is the ‘basic assumptions and beliefs that
are shared by members of an organisation, that operate
unconsciously and define in a basic taken-for-granted fashion an
organization's view of itself and its environment’.
 VALUES

BELIEFS

BEHAVIOURS

PARADIGM OR
TAKEN FOR
GRANTED
ASSUMPTIONS
 The culture of an organisation is often
conceived as consisting of four layers.

• The values of a company state how managers and employees should conduct
themselves? How they should do business? and what kind of organisation
they should build to achieve the mission? Values are commonly seen as the
bedrock of a company’s organizational culture: the set of values, norms, and
standards that control how employees work to achieve an organization's
mission and goals
• Beliefs are more specific, but again they can typically be discerned in how people talk
about issues the organisation faces; for example, a belief that the company should not
trade with particular countries or that professional staff should not have their professional
actions appraised by managers.

• Behaviors are the day-to-day way in which an organisation operates and can be seen by
people both inside and outside the organisation. This includes the work routines, how the
organisation is structured and controlled and ‘softer’ issues around symbolic behaviors.
• Taken-for-granted assumptions are the core of an organization's culture. They are the
aspects of organizational life which people find difficult to identify and explain
 Culture’s influence on strategy
• The taken-for-granted nature of culture is what makes it centrally
important in relation to strategy and the management of strategy.
There are two primary reasons for this:
Culture as a driver of strategy:
Managing culture: Because it is Organisations can be ‘captured’ by
difficult to observe, identify and their culture and find it very
control that which is taken for difficult to change their strategy
granted, it is difficult to manage. outside the bounds of that culture.
.
 Ethical behaviour
• To foster ethical behaviour, businesses must build an organisation culture
that places a high value on ethical behaviour. Three actions are particularly
important.
• Firstly, businesses must explicitly articulate values that place a strong
emphasis on ethical behaviour. Many companies now do this by drafting a
code of ethics, a formal statement of the ethical priorities to which a business
adheres.
• Secondly, having articulated values in a code of ethics or some other
document, it is important that leaders in the business give life and meaning
to those words by repeatedly emphasizing their importance and then acting
on them
• Finally, building an organisation culture that places a high value on ethical
behaviour requires incentive and reward systems, including promotional
systems that reward people who engage in ethical behaviour and sanction
those who do not.
• Ethical core values underlay the vision statement to ensure the stability of
the strategy, and thus lay the groundwork for long-term success. Ethical core
values are the guard rails that help keep the company on track when
pursuing its mission and its quest for competitive advantage.
 GOALS

• Well construed goals denote what an organisation hopes to accomplish in a future period
of time. They represent future state of outcome of effort put in now.
 OBJECTIVES

• Objectives form the basis of the functioning of an organisation. It is the

setting of strategic objectives that the strategic vision of a firm into a specific
performance targets. Objectives play a very important role in the
organisation. They define the organization's relationship with the
environment, help an organisation pursue its vision and mission, provide the
basis for strategic decision making and provide the standards for
performance appraisal.
They are as follows :
Specific: The first step towards setting objectives is to specify
what the company wants to achieve.
Understandable: The objectives should be such that they are
understandable to those who are expected to achieve them.
Clarity in objectives helps to avoid ambiguity which in turn helps
to achieve the desired results.
Measurable: Objectives should be precise and measurable. There
has to be a standard against which they can judge their
performance.
Attainable: Objectives must be challenging but realistic or
attainable
Relevant: Objectives must be linked to the overall vision and
mission of the organisation
Time Bound: Objectives should specify a time period.
The important issues that need to be kept in mind while setting
objectives are as follows:

Specificity: Specificity is related to the organizational level for which

a set of objectives have been stated. Objectives may be stated at
different levels of specificity.
Multiplicity: The issue of multiplicity arise from the fact that it is
rare for an organisation to work on a single objective or a few
objectives.
Periodicity: Objectives may be set for different time frame. It is
possible to set long term, medium term and short term objectives.
Verifiability: The issue of verifiability revolves around the question
of deciding whether an objective has been met or not.
Reality - : It is often found that organisations have two set of objectives
namely, official and operative. While the official objectives are those which
the organisation professes to attain, the operative objectives are those
which they seek to attain in reality

Quality - The capability of an objective to provide a specific direction and a

tangible basis for evaluating performance determines the quality of an
objective.
OBJECTIVES OF STRATEGIC
MANAGEMENT
The objectives of strategic management may be listed as
under:
To identify opportunities and adapt resources to exploit the opportunities created.

To help managers to understand the key relationships among actions, context, and performance by providing the
conceptual frameworks.

To help an organisation enjoy competitive advantage.

To monitor and remain responsive to the demands of key stakeholders

To identify the critical success factors and meet the needs and wants of the customers.

To overcome inertia and accept the changes in the ever-changing environment to remain competitive and at times to
survive.

To develop a creative and innovative attitude and to think strategically.

ORGANISATIONAL GENOMICS
Organizational Genomics
• Genomics is the study of all of a person’s genes (the genome),
including interactions of those genes with each other and
with the person’s environment.
• Corporations face a massive challenge in trying to organise,
communicate and respond to all of their different
stakeholders.
• Department of Public Affairs, investor relations, customer
relations, community relations, etc. are some of the examples
of boundary- spanning departments. All managers and
employees need to be aware of how people behave in order
to provide the best working environment.
• Organizational behaviour is about how people may be
motivated to work together in more effective ways. The
interaction required to direct a group toward a set of
common goals is called organisational communication. An
effective and efficient communication system requires
managerial proficiency in delivering and receiving messages.
• A positive attitude towards work depends on mutual
relationships within a workgroup which can be related to the
inner and outer system.
• One develops many interactions towards people who
constitute a workgroup.
• One develops many interactions towards people who
constitute a workgroup.
Incorrect self-estimation can result from underestimating
people in the following situations:

People with lower qualifications;

People who do not tolerate on a higher social, educational, and financial

level;

People who hold a high opinion of themselves which is not based on facts;
People who feel inferior;

People who do a great job even though they conceal their true opinion of
themselves.
STRATEGIC LEADERSHIP
Strategic Leadership

• It is about how to effectively manage a company’s strategy

making process to create competitive advantage
• Some of the key qualities that a strategic leader is expected
to have are as follows:
• Strategic leader should be a visionary. He should have a
strong sense of direction and a clear and compelling vision
of where the organisation should go
• He should be capable of eloquently communicating this
vision to others within the organisation in order to sensitise
them and consistently articulate this vision to them until it
becomes a part of the organisational culture.
• A good strategic leader must have the ability to identify
and articulate the business model the organisation will use
to attain the vision. This requires a fit between the
organisational strategies with the organisational vision.
• A good strategic leader should demonstrate a sense of
commitment towards the vision and the business model
through his actions and words.
• He should develop a strong network of both formal and
informal sources to remain well informed about
whatever is happening in and around the organisation.
• A good strategic leader should be able recognise and
empower subordinates to make decisions. This not only
acts as a motivator for the subordinates but also relives
the leader from being overloaded with responsibilities.
• A good strategic leader should be able recognise and
empower subordinates to make decisions. This not only
acts as a motivator for the subordinates but also relives
the leader from being overloaded with responsibilities.
EMOTIONAL INTELLIGENCE
• In order to estimate someone’s psychological capabilities
Goleman (1998) used a term called emotional intelligence.
• A bundle of psychological attributes that many strong and
effective leaders exhibit
• Self-awareness—the ability to understand one’s own moods,
emotions, and drives, as well as their effect on others.
• Self-regulation—the ability to control or redirect disruptive
impulses or moods, that is, to think before acting
• Motivation—a passion for work that goes beyond money or
status and a propensity to pursue goals with energy and
persistence.
• Empathy—the ability to understand the feelings and
viewpoints of subordinates and to take those into
account when making decisions.
• Social skills—friendliness with a purpose
 According to Goleman (1998)
• Self aware and self regulating individuals tend to be more
confident and better able to cope with ambiguity and more
open to change.
• People respect leaders who are self aware and self
regulating.
• People who are self aware recognise their own limitations
and being self regulated consider their decisions carefully.
These two attributes, self awareness and self regulation,
help to elicit the trust and confidence of subordinates.
• Strong motivation exhibited in a passion for work can also
be infectious. It motivates subordinates to a great extent to
give their best.
ORGANISATIONAL CHANGE
• Introducing new software or updating marketing
practices
• Updated business processes
• A full-on restructuring
• Leadership changes
• Updated thinking
• New project management tools
• Budget constraints
• Shifts in strategy
The term organizational change management refers to a
methodology that helps businesses adapt to adjustments of all
kinds.
• It helps employees, stakeholders, and project teams
prepare and set expectations for coming change.
• It helps businesses roll out and acclimate to change.
 There are countless organizational change management (OCM)
methods. Each involves a basic series of steps or practices that could
be linear or cyclical in approach. Some of the most popular methods
include:

Kotter 8-Step Process for Leading Change: Create → Build → Form → Enlist →
Enable → Generate → Sustain → Institute

McKinsey & Company’s 7-S Framework: Style, Skills, Systems, Structure, Staff,
and Strategies = Shared Values & Goals
Kurt Lewin’s Change Model: Unfreeze → Change → Refreeze
• ADKAR Model: Awareness → Desire → Knowledge →
Ability → Reinforcement
• The Kubler-Ross Model: Shock → Anger → Bargaining →
Depression → Acceptance
• Satir Change Management Model: Late Status Quo →
Resistance → Chaos → Integration → New Status Quo
• William Bridges’ Transition Model: Ending → Neutral
Zone → New Beginnings
The Association of Professional Change Management (ACMP) Standard for
Change Management. The ACMP Standard includes a definition of
practices, processes, tasks, and activities for change management

• The following are the steps as recommended by ACMP:

• Evaluate Change Impact & Readiness
• Formulate Your Strategy
• Develop Change Management Plans
• Executing Change Management Plan
• Closing the Change Management Effort
• It’s important to look at employee involvement during this process
Alignment with Individual Level Objective
and Organizational Objective

• Personal objectives refer to the job-specific goals of

each individual employee.
• The goal is to achieve quantity and quality of effort
between individuals and the team.
• Employee objectives are ways to measure progress and
performance for members of a team.
• These can help employees better understand their roles and help
managers guide their teams in achieving important
organizational and personal goals.
• Knowing how to write effective objectives can help leaders and
team members create a more productive work environment.
• Employee objectives are targets that an employee and their
manager agree on to measure the employee’s job performance.
• Companies may set new objectives for their employees quarterly,
biannually or annually.
• These objectives provide employees with guidance for their
responsibilities that contribute to larger company goals.
• To create effective objectives, make sure they’re specific,
measurable, attainable, relevant and time-based.
• These guidelines are often abbreviated using the
acronym SMART.
• Specific: Specific goal provides the employee with the exact result
needed for their performance to be successful. A clear objective can
optimize productivity and effectiveness.
• Measurable: Successful goals can usually be measured using
metrics that determine an employee’s success or progress. A quota,
for example, is one way to measure an employee’s success.
• Attainable: Effective goals are often those which are ambitious and
also possible to achieve.
• Relevant: A relevant objective contributes to the larger goals of a
company.
• Time Based: Set realistic timelines for employees to complete their
tasks
 FAST Framework
• It was in the year 1954 when Peter Drucker, the great
management guru, introduced “management by objectives”.
Management by objectives according to Drucker is an
approach where employees would agree with their boss on a
set of goals and work toward achieving those objectives
throughout the year.
• The four core principles that underpin effective goal systems
can be summarised into the acronym FAST. Goals should be
embedded in frequent discussions; ambitious in scope;
measured by specific metrics and milestones; and
transparentfor everyone in the organisation to see. The
modern concept views goals to be FAST and not SMART.
 Performance objectives
• Productivity: This has to do with the amount of work that an
employee is expected to perform within a specific time. This
is one of the most important performance objectives for
employees. In the service industry such as banking, this could
be the number of clients that a service consultant has
assisted.
• Quality and efficiency: This has to do with the manner of
performing activities. It takes productivity further to deal
with how fast the worker can perform a task. This measure
also takes quality into consideration. Not only should the
service be fast, but it must be of good quality.
• Education and self-development: This performance
objective for employees considers the needs of workers. It
focuses on the goals workers set to develop themselves.
It can include things such as an employee learning a new
skill, doing a new course or simply job-shadowing
someone. This makes workers more valuable due to
continuous growth in their respective fields. This also
encourages employers to see how committed workers are
to their own growth and personal development.
The reasons why aligning individual goals to
organizational goals is important:
• It helps to sustain employee motivation by helping
employees measure the impact of their actions. When
personal goals are aligned, an individual takes
accountability of the tasks in hand.
• Aligning goals also help in prioritization of tasks and
responsibilities.
• When individuals understand how their personal goals
relate to one another and to the larger goals of the
organisation, collaboration and team cohesiveness
increases.
 Balanced Scorecard Approach
• The balanced scorecard: a framework to translate a strategy into
operational terms. Source: Robert S. Kaplan and David P. Norton,
‘‘Using the balanced scorecard as a strategic management system,’’
Harvard Business Review January. February 1996 .: 76.
There are broadly two types of objectives namely,
financial and strategic.
• Financial objectives relate to the financial performance
targets that the management has established for the
organisation to achieve.
• Financial objectives of an organisation can include
increasing the annual revenues, annual increase in the
earnings per share, profit margins of fixed percent,
increased shareholder value, generating internal cash
flows, etc.
• Strategic objectives relate to target outcomes that
indicate whether a company is strengthening its market
standing, competitive position and future business
prospects.
• Strategic objectives of an organisation can include
winning a certain per cent of market share, achieving
lower overall costs than competitors, developing
broader, better and deeper technological capabilities
than rivals, consistently getting new or improved
products to market ahead of the rivals, having stronger
national and global sales and distribution capabilities
than rivals, etc.
The balance score card model requires an evaluation of
organizational performance from four different
perspectives.
• Financial Perspective: It considers the financial measures such as
revenues, earnings, return on capital and cash flow arising out from
the strategic intent of the organisation
• Customer’s Perspective: This measures the ability of the
organisation to provide quality goods and services, effective
delivery and overall customer’s satisfaction.
• Internal Business Perspective: The mechanisms through which the
performance expectations are achieved are called as internal
businesses processes.
• Learning and Growth Perspective: This perspective focuses on the
ability of the organisation to manage its business and adapt to
changes in the environment.
ECONOMIC VALUE ADDED
ECONOMIC VALUE ADDED
• Profit is the surplus of revenues over costs available for
distribution to the owners of the firm.
• A widely used measure of economic profit is economic
value added (EVA), devised and popularized by the New
York consulting firm Stern Stewart & Company.
• EVA =
• Net Operating Profit After Tax (NOPAT) - Cost Of Capital
• Cost of capital is calculated as: capital employed
multiplied by the weighted average of capital (WACC).
Economic profit has two main advantages over
accounting profit as a performance measure.
• First, it sets a more demanding performance discipline
for managers. As Stern Stewart’s calculations show,
many major corporations’ apparent profitability
disappears once cost of capital is taken into account.
• Second, using economic profit improves the allocation of
capital between the different businesses of the firm by
taking account of the real costs of more capital intensive
businesses. (Grant, 2012)