Business Strategy

Unit 1
• Concept and importance of strategic management
• Importance of strategic decisions
• Elements of strategic management
• Need for strategy
• Company values
• Levels of strategy
• Strategic management process
• Changes in the approach to strategic management
• Different perspectives on strategy formulation
• Concept and features of strategic planning.
 Concepts of Strategy
 Strategy (Greek Word) is a general, detailed plan of action, encompassing a
long period of time*, to achieve a complicated goal.
 Strategy, as a way of action, becomes necessary in a situation when, for the
direct achievement of the main goal, the available resources are not enough.
 The task of strategy is an efficient use of the available resources for the
achievement of the main goal.
 Detailing it further, strategy is all about gaining (or being prepared to gain) a
position of advantage over competitors or best exploiting emerging
possibilities.
 As there is always an element of uncertainty about the future, strategy is
more about a set of options ("strategic choices") than a fixed plan.
 Strategy as a pattern in a stream of decisions.
 Concepts of Strategy
Military Science
 In military science , strategy is the utilization during both peace and war, of
all of the nation's forces, through large scale, long-range planning and
development, to ensure security and victory.
Game /Competition
 In game, a strategy refers to the rules that a player uses to choose between
the available actionable options.
 Every player in a important game has a set of possible strategies to use
when choosing what moves to make.
 A strategy refers to look ahead and considers what actions can happen in
each contingent state of the game for instance, if the player takes action 1,
then that presents the opponent with a certain situation, which might be
good or bad, whereas if the player takes action 2 then the opponents will be
presented with a different situation, and in each case the choices they make
will determine our own future situation.
 Concepts of Strategy
Strategy based games generally require a player to think through a sequence of
solutions to determine the best way to defeat the opponent.

Management Science /Business

 In management science/business field it is the determination of the basic long-
term goals and objectives of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for carrying out these goals.

 Strategy is large-scale, future oriented plans for interacting with the

competitive environment to achieve company objectives.
 It is a company’s game plan.
 It is a detail plan about how, when, and where the company should compete
against whom it should compete, and for what purposes it should compete.
 Concepts of Strategy
 Strategic planning/management is defined as the set of decisions
and actions that result in the formulation and implementation of
plans designed to achieve a company’s objectives.
 Strategic management is a set of managerial decisions and
actions that determines the long-run performance of a
corporation.
 It includes environmental scanning (both external and internal),
strategy formulation (strategic or long-range planning), strategy
implementation, and evaluation and control.
 It emphasizes the monitoring and evaluating of external
opportunities and threats in light of a corporation’s strengths and
weaknesses.
 Dimensions of Strategic Decisions
 Dimensions of Strategic Decisions refers to the types of decision
that the organizations decides. The following are the dimensions
of strategic decisions.

• Strategic issues require top mgmt decision.

• Strategic issues require large amt of firm’s resources
• Strategic issues often affects firms long term prosperity
• Strategic issues are future oriented
• Strategic Issues Usually Have Multifunctional and Multi
Business Consequences
• Strategic Issues Require Considering the Firm’s External
Environment
 Strategic Issues Require Top Management Decisions

 Strategic decisions impact several areas of a firms 'operation so they

require top management involvement.
 Only top management has the perspective needed to understand the
broad implications of such decisions and power to authorize the
necessary resource allocations.

Strategic Issues Require Large Amounts of the Firm’s Resources

 Strategic decisions involve substantial allocations of people, physical

assets, or moneys that either must be redirected from internal sources
or secured from outside the firm.
 They also commit the firm to actions over an extended period.
 For these reasons they require substantial resources.
Strategic Issues Often Affect the Firm’s Long Term Prosperity

 Strategic decisions generally commit the firm for a long time,

typically five years. However, the impact of such decisions
often lasts much longer.
 Once a firm has committed itself to a particular strategy, its
image and competitive advantages usually are tied to that
strategy.
 Firms become known in certain markets, for certain products,
with certain technologies.
 They would put in risk their previous gains if they shifted from
these markets, products, or technologies by adopting a
radically different strategy.
 Strategic Issues Are Future Oriented
 Strategic decisions are based on what managers forecast, rather than
on what they know.
 More emphasis is placed on projections that will enable the firm to
select the most promising strategic options.
 Success factor lies in - Proactive (anticipatory) stance toward change.

Strategic Issues Usually Have Multifunctional and Multi Business

Consequences

 Strategic decisions have complex implications for most areas of the

firm.
 Decisions about such matters as customer mix, competitive emphasis,
or organizational structure necessarily involve a number of the firm’s
strategic business units(SBUs),divisions, or program units.
 All of these areas will be affected by allocations or reallocations of
responsibilities and resources that result from these decisions.
 Strategic Issues Require Considering the Firm’s
External Environment

 All business firms exist in an open system.

 They affect and are affected by external conditions that are
likely beyond their control.
 To successfully position a firm in competitive situations, its
strategic managers must look beyond its operations.
 They must consider what relevant others such as competitors,
customers, suppliers, creditors, governments and labors are
likely to do.
 A Comprehensive Strategic Management Model

Perform
External
Audit

Implement
Develop Generate, Implement
Establish Strategies – Measure and
Vision and Evaluate and Strategies –
Long-Term Mkt, Fin, Acc, Evaluate
Mission Select Management
Objectives R&D, MIS Performance
Statements Strategies Issues
Issues

Perform
Internal
Audit

Formulation Implementation Evaluation

Elements/Components of Strategic Management
• Strategic Management is concerned with strategic decision and action from top
level management. It focuses on formulation, implementation and control of
strategy.

A. Strategic Planning
Strategic planning is one of the key elements of strategic management. It involves the
following elements.
1.Environment Scanning
– It is the method or technique of acquiring the information and analyzing the trends
emerging in the business environment.
– It involves monitoring changes and development in both internal and external
environment that have potential impact on the business of an organization.
2. Strategy Formulation
– Strategy formulation is the process of determining appropriate cource of action for
achieving orgazational objectives.
– Strategy formulation involves formulating corporate level, business level and functional
level strategy.
– Choices of these strategies are based on strategic options and that should be suiatable,
feaesible and acceptable.
B. Strategy Implementation
 Strategy implementation often is called the “action stage” of strategic
management.
 Strategy implementation includes developing a strategy – supportive
culture, creating an effective organizational structure, redirecting
marketing efforts, preparing budgets, developing and using information
systems, and linking employee compensation to organizational
performance.
 Often considered to be the most difficult stage in strategic management.
Strategy implementation requires personal discipline, commitment and
sacrifice.
 Successful strategy implementation hinges on managers ability to
motivate employees, which is an art than a science.
 Strategic implementation consists of the sub elements as: Structure
design, resource planning and Management system.
C. Strategic Evaluation and Control
• It is concerned with tracking the implementation performance of strategy.
• Managers desperately need to know when particular strategies are not
working well; strategy evaluation is the primary means for obtaining this
information.
• All strategies are subject to future modification because external and internal
factors are constantly changing.
• Three fundamental strategy – evaluation activities are:
1) Reviewing external and internal factors that are the bases for
current strategies,
2) Measuring performance, and
3) Taking corrective actions
• Strategy evaluation is needed because success today is no guarantee of
success tomorrow!
 Need for Strategy
• The need for strategy arises to meet environmental challenges and to get the
opportunities from the market. Besides this, the need for strategy arises due to
following reasons.

1) Gives Direction- Gives direction to an organization, set common goal and

shared responsibility.
2) Creates a Measure for Success- Measure organizations performance and
growth against the desired goals. Find areas for improvements.
3) Increase Adaptability- Need to response to change to meet the demand.
Adapt strategy as required.
4) Drives Decisions- Strategy is what drives the decisions in business.
5) Resource Allocation- Strategy is about making choices. Choices are based
on the availability of resource and choice is for optimum utilization.
6) Determine Strategic Position- Without effective strategy, it would be
difficult for business firms to survive, grow and secure strategic position.
Strategy helps to determine competitive position.
 Levels of Strategy
Single Business Firm

Corporate/Business
Level
Corporate/Business
Level

HRM Strategies R&D Strategies Marketing Strategies

Financial/Accounting Functional
Strategies
Level

Multiple Business Firms

Corporate Corporate Level
Strategies

Business Business
Business I Business II Level
III

Finance/
HRM Marketing Accountin R&D Functional
Strategies Strategies g Strategies
Level
Strategies
 Levels of Strategy
 The decision making hierarchy of a firm typically contains three levels.
Corporate level
 Composed principally of a board of directors and the chief executive
administrative officers.
 They are responsible for the firm’s financial performance and for the
achievement of nonfinancial goals such as enhancing the firm’s image and
fulfilling its social responsibilities.
 Primarily corporate unit focus of their concern with stockholders and society
in large.
 In a multi business firm, corporate level executives determine the businesses
in which the firm should be involved.
 They set objectives and formulate strategies that span the activities and
functional areas of businesses.
 Types of corporate level strategy are: Stability, Expansion/Growth,
Retrenchment Strategy, Combination Strategy.
 Continue…….
Business Level

 Business level will be composed of business and corporate managers.

 These managers translate the statements of direction and intent generated at
the corporate level into concrete objectives and strategies for individual
business divisions or SBUs.
 Business level managers determine how the firm will compete in the
selected product market arena.
 They try to find out most secure and promising market segment from
which they can gain the competitive advantage.
 Different Types of business level strategy are: Cost Leadership Strategy,
Differential Strategy and Focus Strategy.
 Continue……
Functional Level

 This level will be composed principally of managers of product,

geographic, and functional areas.
 They develop annual objectives and short term strategies in such areas
such as production, operations, research and development, finance and
accounting, marketing and human resource management.
 The responsibility of these managers is to implement or execute the firm’s
strategic plans.
 Types of Functional level strategy are: Production Strategies, Marketing
Strategies, Finance Strategies, Research and Development Strategies,
Human Resource Management Strategies.
Characteristics of Strategic Management Decisions
The characteristics of strategic management decisions vary with the level of strategic
activity considered.

Corporate Level Decisions Business Level Decisions Functional Level Decisions

More Value oriented Less Action oriented
More Concept costly,risky,potentially Relatively short range
Greater risk profitable than corporate Low risk
High cost level decisions Modest costs
More profit potential More costly,risky,and Highly flexible
Greater need for flexibility potentially profitable than Requires less cooperation
Longer time horizons functional level decisions Quantifiable
Decisions areas are: choice Decisions making areas Decisions areas are:
of businesses are: Generic Vs brand name
Dividend policies Plant location labeling
Sources of long term Market segmentation Basic research vs applied
financing Geographic coverage research
Priorities for growth Distribution channels General purpose vs specific
purpose
Lose vs close supervision
 Formality in Strategic Management
 The formality of strategic management systems varies widely among
companies.
 Formality refers to the degree to which participants, responsibilities,
authority, involve in decision making area as required.
 Greater formality is usually positively correlated with the
cost,comprehensiveness,accuracy,and success of planning.
 A number of forces determine how much formality is needed in
strategic management.

1. Size of organization
2. Stage of Firm’s Development
3. Predominant management styles
4. Environment’s Complexity
5. Planning System Model
 Formality is associated with the size of the firm and with its stage of
development.
Small Firms
 These forms follow the entrepreneurial mode, basically under the control of
a single individual, and they produce a limited number of products and
services.
 In these firms strategic evaluation is informal, intuitive and limited.
Medium Size Firms
 These firms follow adaptive mode in relatively stable environments.
 The identification and evaluation of alternative strategies are closely related
to existing strategy.
 These firms emphasize the incremental modification of existing competitive
approaches.
Large Firms
 These firms follow the planning mode in strategic management
 The strategic formality will be comprehensive, and formal planning system.
 Strategic Management Process

Set the Context:

Establish or review
vision, mission and
values
Continuous monitoring, evaluation, learning and changing

Continuous monitoring, evaluation, learning and changing

External Internal
environment environment
analysis analysis

Set strategic goals/objs.;

identify strategic options;
make strategic analysis
and choice

Strategy
Implementation

Strategy
Evaluation and
Control
 Company Values (Core Values)
• ….are the beliefs ,traits and behavioral norms that company personnel are
expected to display in conducting the company’s business and pursuing its
strategic vision and strategy.

• …..the operating philosophy or principles that guide an organizations internal

conduct as well as its relationship with it’s customers, partners and
shareholders.

• .....a principle that guides an organization’s internal conduct as well as its

relationship with the external world.

• …..are usually summarized in the mission statement or the company’s

statement of core values.

• Some Company’s values are:

• Facebook: Focus on impact, move fast, be bold, be open, build social value.
• Procter and Gambel: Integrity, Leadership. Ownership, Passion for winning and
Trust.
Guidelines In Developing Core Values
1) Keep the list of values to between five and seven.
2) Create phrases but not paragraphs.
3) Make these values specific, not generic.
4) Values need to be shared
5) If its already stated in your mission, do not repeate it.
 Approaches to Strategic Decision Making
• Strategic Decision making involves choices regarding the
cources of action for long term future.
• It is based on the consideration of strategic alternatives. The
following four are the important apporach to strategic decision
making.

1. Intuitive –Emotional Approach

• In this approach , decisions are based on intutions of decision
makers.
• The decision maker takes into account a number of alternatives
into consideration, but simultaneously jumps one step in analysis
and search for another and back again.
• The decision maker is normally an activist, fast mover and finds
unique solutions to difficult problems.
2. Rational- Analytical Approach
• In the rational- analytical approach, the decision maker is
intelligent and rational.
• The decision maker makes the choice in full awareness of all
the feasible alternatives as well as consequences alanysis.
• Basic assumption is decision maker is rational, unbaised,
knowledgable and self deciplined.
• The rational approach to decision making includes following
steps:
1. Recognize the need for decision
2. Establish, rank and weight criteria
3. Gather information and data
4. Identify possible alternatives
5. Evaluate each alternatives
6. Select best alternative.
3. Satisfying Approach
• Satisfying meas choosing the first alternative that meets the decision
makers minimum standard of satisfication that depends on the current
level of apriration.
• Level of aspiration refers to the level of performance that a person expects
to attain and it is determined by the person’s prior success and failures.
• Better than previous approach because of:
• Intutive approach has higher risk.
• Rationality has certain definite limits of human beings.

4. Political- Behavioural Approach

• In Political behavious approach, decision maker considers all the
stakeholder( government, financial institutions, suppliers, competitors,
dealers, employees, customers and shareholders) in making decisions.
• Decisions are made through mutual negotiations and sonsultation among
all the stakeholder who affect and/or are affected by the decisions.
 Changes in Approach to Strategic Management
• Strategy is a planned or emergent course of action that is expected to
contribute to the acheivement of organizational goal.
• There are different strategic approaches emerged and changed over the period
of time. They are as follows:
1. Corporate Plannig Perspective (1950s and 1960s)
• During these periods, market was considered as stable and companies were
formulating long term plans for next five years. Companies were primarily
concerned with expanding markets and choice of the customer was price.
• As a stable environment, companies were enjoying high degree of
predictability and corporate planning apporach was used to compete in the
market.
2. Diversification Perspective (960s and 1970s )
• This perspective was emerged because of increased competition.
• Diversification ( Related and Unrelated) was increased and companies were
battling to increase market share and competing to capture new markets.
3. Industry based Perspective
• This approach to strategic management was emerged in 1980s
when Michael Porter emphasized companies to build defense
against competinf forces or finding positions in the industry.
• Accordingly companies started to analyze their competitive
forces with the aim of gaining competitive advantage.
4. Internal Resource –based Perspective
• This approach to strategic management was concerned with
outsourcing, total quality management, economic value analysis
and benchmarking.
• Focus is to look at the internal resource and competencies to get
the competitive advantages.
5. Innovative Perspective
• This approach was emerged during 1990s.
• Hyper competitive firms emerged and engaged in continious
innovation, new products and services development which
provides value and performance. So Innovative perspective is
appropriate as an approach to Strategic management in case of
hypercompetition.
6. Co-optition Perspective
• This perspective emerged to enhance cooperation and well
competition.
• Now a days companies are benefited from collaboration,
cooperation and joint alliances.
• In the 21st century it is difficult for a companies to survive
without developing cooperation between competing forces,
vending organizations and suppliers. Popular one in todays
context.
 Different Perspective on Strategy Formulation
• Strategy formulation is the set of processes involved in crafting or determining the
strategies of a company.
• It is the process by which an organization choose the most appropriate courses of action
to achieve its defined goal. Some of the important perspectives are:

1. The Design School

• This approach sees strategy formulation as a conceptual process.
• More, recently this approach has been represented in the SWOT model, which
effectively marks the position of this school in spanning the process of strategic
management from the recognition of environmental influences.

2. The planning School-

• The planning school follows different stages in planning model as:
• Set Objective
• External Audit- Industry analysis, competitor analysis.
• Internal Audit- Companys strength and weaknesses.
• Strategy evaluation- Comparision between several strategies
• Strategy Operationalization- Bring plan into action Scheduling- timetabling of the
whole process.
3. The Positioning School
• This approach dates in 1980s by Michaels Poters competitive strategy.
• The idea was only a few key or generic strategies are desirable in any
given industry
• Key premises of this school are:
 Strategies are generic positions in market place.
 The market place is economic and competitive.
 The strategy formulation process is therefore one of selection of a generic
position based on analysis.

4. The Entrepreneurial School

• This school has its central concept vision.
• The strategy formulation is focused on individual leader, intutions,
judgement, wisdom, experience.
• The premises of this school are:
 Strategy exists in the mind of leader in form of vision.
 It’s a continious process
 Leader promotes its implementation, control & reformulation.
5. The Cognitive School
• Focus is on the mind of the strategist.
• The school includes work on cognitive bias, the informational
processing view of strategy.
• Inputs flow through all sorts of distorting filters before they are
decoded by cognitive maps.
6. The Learning School
• Sees strategy as an emergent process.
• The complexity of environmenr pushes to form strategy and it
must involve the process of learning over time to formulate or
implement strategies.
• The role of leader is not to create strategy but to manage the
process of strategic learning.
7. The Cultural School
• This school views strategy formulation is the process of social
interaction based on shared beliefs and values of the member of
the organization.
• Individuals cannot normally fully describe these beliefs and
values; indeed they may be only partly conscious of them.
• Strategy formulation takes the form of collective perspective.
8. The Environmental School
• The thought of this approach is that there is no any best way to
manage an organization, it all depends on the situation.
• The environemnt is the central actor of decision making process.
• The role of leader is to read the environmenr and help
organization to adapt.
 Approaches to Strategy Formulation
1.Intended Strategy
 An intended strategy is the strategy that an organization hopes to execute. Also
known as deliberate strategy.
 Intended strategies are usually descried in details withinan organization’s
strategic plan.

2. Realized Strategy
 A realized strategy is the strategy that an organization acyually follows.
 Sometimes the organization may not implement the intended strategy due to
change in circumstances . Thus realized are a products of a firms intended
strategy.

3.Emergent Strategy
 An emergent strategy is an unplanned strategy that arises in response to
unexpected opportunities and challenges.
 This type of strategy is developed based on experience and learning of managers.
 Strategic Planning
• Definition: Strategic Planning can be understood as a systematic long-
range planning activity, that an organization uses to fix priorities,
strengthen operations, ascertain objectives and focus on the resources
required and are to be allocated in order to pursue the strategy and attain
the objectives.
• Strategic Planning is an analytical process which formulates strategic and
operational plans for the organization. The implementation of strategic
plans is possible through projects, whereas various units or divisions of the
firm implement operational plans.
• Strategic planning allows us to focus our energy and resources on the most
important and high priority opportunities whilst addressing our weaknesses
and threats.
• There is no right or wrong option when it comes to selecting a strategic
planning model for your business. The best results are seen when the nature
of your business, your mission, and your core values align with your
business model.
 Key features of strategic planning.
1. Provides Clarity & Focus
 A strategic plan is vital to present a business’s vision. It shows
how a business places priority on activities that will take place
to achieve its vision.
 Strategic planning is a process that allows us to analyze and
respond to the things occurring inside and outside of business.
 Done properly planning can set up a business for success.
 It supports the definition of goals, key results, actions, and
measures that provide direction and clarity. It assists a business
to understand its purpose as well as see into its future.
2. Aligns People and Business
• A strategic plan provides a basis for change that allows staff to assess the
resources they require to achieve a positive result. Staff should be
involved in planning to ensure a strategy is aligned with day to day
activities.
• The result is that staff are able to make more informed decisions that
support the business in achieving its goals.
• Effective strategic planning:
• Firstly motivates, rewards and educates staff by tying in skills with
assigned activities
• Secondly allows us to be more productive by focusing on the most
important activities
• Moreover aligns staff with business outcomes
• A strategic plan should look at the skills, abilities, and concerns of staff.
Capabilities should be aligned with assigned activities to ensure staff
members are set up for success.
3. Supports Continuous Improvement
• Strategic planning allows us to create future success and provides the
means to adapt and respond to change. This is an ongoing process that
supports improved decision making and is required to achieve positive
business outcomes.
• A strategic plan should not be a set and forget.
• Strategic planning can support a ‘Plan, Do, Check, Act’ cycle for delivery
of improvements:
• Plan – analyze and create improvement objectives and planned actions. Define
resources required to deliver improved outcomes
• Do – assign people and dates to improvement actions.
• Check – setup a a review which allows regular check points to assess that
improvements activities are producing positive outcomes. Moreover measures
can be used to provide a clear and quantified measure of good and bad results
• Act – if an improvement activity has delivered an expected outcome actions are
able to be repeated to reinforce the success.

• Where an improvement activity has not delivered an expected outcome

changes may need to be made and the cycle run again
4. Enables Growth
• Strategic planning allows us to scan the market, understand where
to play and how to win. It is used to identify and seize
opportunities and anticipate threats that need to be managed.
Example: The use of technology.

5. Responds to Opportunity and Threat

• A strategic plan will help us set priority to opportunities that will
produce the best results whilst helping us manage threats to our
business. A strategic plan provides a lens into our future state and
sets control over our destiny.
• Ability to identify and manage Issues and risk will increase
through strategic planning.
6. Follows a Structured Process
• Whilst different methods are available to create a strategic plan
(OKR, MBO, SMART), which have subtle differences, they
mostly follow a consistent pattern which includes:
• Firstly, set a mission, vision, values and goals and outcomes
• Secondly, run a scan to determine opportunities and threats
• Thirdly, design a strategy, which matches strengths with
opportunities whilst addressing weaknesses to external threats
• Next, deliver the strategy, which requires us to set a budget,
define resources, develop procedures and deliver actions
required to achieve our goals
• Moreover evaluate and control, which involves a regular
reviews and adjustment as new information becomes known.
 Benefits of Strategic Management
1. Enhances the firm’s ability to prevent problems
2. Emphasizes group-based strategic decisions likely to
be based on best available alternatives
3. Improves employees’ understanding of the
productivity-reward relationship
4. Reduces gaps/overlaps in activities among
employees as their participation clarifies differences
in roles
5. Resistance to change is reduced
6. Build Synergy
7. Deals with opportunities and Threats
The End