Strategic Management

Dr. Kumar Saurav

 UNIT 1 (5 Hours) Introduction: meaning nature,
scope, and importance of strategy; Model of
strategic management, Strategic Decision-
Making Process. Corporate Governance:
Composition of the board, Role and
Responsibilities of the board of directors, Trends
in corporate governance, Corporate Social
Responsibility. Case Studies and Latest Updates.
 Syllabus
UNIT 1
Introduction
Meaning, Nature, Scope and Importance of Strategy
Model of Strategic Management
Strategic Decision-Making Process
Corporate Governance: Composition of the Board
Role and Responsibilities of the Board of Directors
Trends in Corporate Governance
Corporate Social Responsibility
 Unit 1
Meaning, Nature, Scope & Importance of Strategy
Meaning:-
 Strategy came from the Greek word “Strat Agos” which
means The art of the general.
 How a General deceives an enemy, how he deploy forces in
war.
 Clausewitz (1780-1813) known as father of modern strategy.
 He was the first to explain role of war both as an instrument
of social development and as a political act.
 Clausewitz defined Strategy as “ the art of the employment
of the battle as a means to gain the object of war”
 According to Chandler “Strategy is the determination of the
basic long term goals of an enterprise and the adoption of
courses of actions and the allocation of resources
necessary for carrying out these goals”.
 Greatest threatening for any organization is to change
both @ internal and external level
Strategy is a set of key decisions to meet
objectives.
It refers to complex web of thoughts, ideas,
insights, experiences, goals, memories,
perceptions & expectations that provides general
guidance for specific actions in pursuit of
particular ends.
Every firms competing
Strategy in the industry has a
strategy, because strategy refers to how a given
objective/s will be achieved.

Implicitly
Explicitly (Operations of various
(Planning) functional
department)
 Organization must have questions
 What business we are in
 What product and service we are offering
 To whom we are offering
 At what price we are offering
 At what time we are offering
 Terms and conditions
 Who are the competitors
 Basis of competition
 According to Mintzberg, “Strategy is a mediating force
between the organization and its environment , consistent
patterns in streams of organizational decisions to deal with
the environment.
 According to Porter, “Strategy is about being different, it
means deliberately choosing a different set of activities to
deliver a unique mix of value”. Trojan
Horse
 Strategy, Tactics & Intent
 Strategy and Tactics both are related to formulating and
carrying out course of action in order to attain organizational
objective.
 Strategy is prelude to actions, Tactics is itelf an action.
 Strategy is concerned with deploying resources, Tactics is
concerned with employing resources.
 Strategy gives Tactics its mission and resources and seeks to
reap the results.
 Example: Assuming the strategic position of company is ‘to be
the best known, most trusted and respected company in the
target market”, if that is goal of an organization then question
is what tactics organization is following to achieve that goal.
 Strategic Intent refers to the purposes the organization strives
for.
 Strategic Management is defined as dynamic process of
formulation, implementation, evaluation and control of
strategies to realize organization’s strategic intent.
 Case : Dorsey Corporation
 Medium sized company in 1975
 Chairman John T Pollak, President Charles Sewell
 3 SBUs
 Chattanooga Glass : Green Coca-Cola Bottle (60% business)
 Sewell Plastic : Plastic Container
 Dorsey Trailers : Cargo for bulk transportation
 Du Pont invented a technology called PET (Poly Ethylene
Terephthalate)
 Nathaniel Wyeth created the first official PET bottle under this
patent
 PET bottles are globally recognized as safe, non-toxic, strong,
lightweight, flexible and 100% recyclable.
 Company Name: Cincinnati Milacron
 In 1977 most of the glass companies were ignoring new plastic
technology.
 Case : Dorsey Corporation
 Dorsey recognized importance of this technology in bottles because of not
only light in nature but also holding well carbonated beverages.
 Result lower transportation cost and less breakage
 Glass manufacturing company come under the purview of
environmentalists and required large investment to meet new emerging
pollution standard.
 Charles saw this technology as an unique opportunity and took approval
and invested 4 Million dollar.
 Competition against giant competitors like Owen Illinois, Continental and
Amco.
 Introduction of PET bottle as an opportunity for smaller company with
older technology
 Introduced technology not only in beverages but also in milk and
chemicals.
 In 1992 Sewell Plastic was market leader in beverage bottle with sales
volume of nearly 800 million dollar.
 Phases in the Development of Strategic
Management

The four phases of Strategic Management Evolution are:-

Phase 1 : Annual Budgeting
Phase 2 : Long Range Planning
Phase 3 : Environmental Scanning
Phase 4 : Strategic Planning
 Toyota Motor Corporation
 In 1937, Kiichiro Toyoda founded the Toyota Motor Corporation,
headquartered in Aichi Prefecture, Japan.
 The company, now headed by Akio Toyoda, the President and
Representative Director, has a capital of around $179,399 million. Its
primary business activities involve automotive manufacturing. As of
March 2016, the company employs around 348,977 people. Sakichi
Toyoda, the founder of Toyota Industries, set certain Guiding Principles
that reflect Toyota’s organizational culture and values, and are the
basis for the corporate management philosophy.
 These were first revised in 1992 and again in 1997 to support its
operations in a multicultural environment. They were modified in
response to the societal changes and the company’s business
structure, which support its global vision, strategies, and operations
worldwide. An example of its strategy to keep with the changing times
is the Toyota Way 2001, which focuses on CSR and customer
orientation, innovative management and the nurturing of its
employee's creativity and teamwork, mutual trust and respect between
labor and management.
 At the heart of the Toyota Way are two pillars continuous improvement
and respect for people. These are supported by five values: challenge,
continuous improvement (kaizen), seeing for yourself (genchi
genbutsu), respect, and teamwork.
 In 1997, Thailand, a regional hub of Toyota’s auto manufacturing industry in
ASEAN, faced an economic crisis resulting from over-investment in real estate
and a liberal financing policy. Toyota Motor Thailand Co., Ltd. (TMT)
subsequently encountered huge losses.
 To overcome the crisis various actions were taken - the TMT first requested and
received two capital injections, totaling US$200 million, from Toyota Motor
Corporation in Japan. However, since the automotive market was down by
about 75%, the TMT had to use a job-sharing approach to retain its skilled, but
redundant, workforce.
 Together with this measure, the company observed it’s “no lay off” policy by
sending about 200 idle associates to Japan for training, while others assisted
their local dealers. To avoid further losses, TMT focused on 100% localization of
parts and took advantage of export opportunities. Undertaking new business
reforms, such as online management of vehicle supply and demand and the
formation of project teams in finance and marketing, helped boost new vehicle
sales.
 For dealers and suppliers, TMT granted credit lines and short term loans.
 At the time, the former king of Thailand, Bhumibol Adulyadej, showed concern
for the issues of possible unemployment and granted a purchase order to TMT
to produce a Toyota Soluna (Vios) and prolong the working period of Thai
workers.
 Instead of selling the vehicle, TMT presented it to the king as a gift; the King, in
turn, granted $17,518 (600,000 baht) to TMT to help establish the
Rachamongkol Rice Mill, a project spearheaded by Ninnart Chaithirapinyo, the
Vice Chairman of TMT.
 As an ongoing TMT-CSR activity, the mill still helps rice farmers
maintain their crop prices and benefits TMT associates and the
overall community. In brief, TMT overcame the crisis of 1997 by
using Kaizen to strengthen its competitiveness and improving
communication among top management and all of its
associates.
 In its developmental path towards sustainability, Toyota Motors
set a Global Vision. The medium to long-term management
plan was prepared and implemented with the controlling
measures as a feedback in its management system. In the
implementation process, the Toyota Way 2001 and the Toyota
Code of Conduct serves as an important global guideline for
daily business operations for all employees.
 Toyota’s divisional organization structure is based on varied
business operations, but is linked to the traditional Japanese
organizational structures.
 In 2013, as a response to the safety issues and corresponding
product recalls crisis of 2009, the centralized hierarchical
structure underwent significant changes to become more
decentralized.
 After the re-organization, Toyota’s new organizational structure has the
following main characteristics: global hierarchy, geographic divisions, and
product-based divisions. The company is now more capable of responding to
regional market conditions and is empowered to speedily respond to issues
and to provide higher quality products. However, the increased decision
making power of regional heads has reduced headquarters' control over the
global organization. Still, this organizational structure facilitates business
resilience and continued growth.
 A study by Wells and Orsato (2005) suggests that there is currently a shift
away from the current all-steel, internal combustion engine car, which
requires automakers to fundamentally reform their systems of production.
The business challenges and the governmental regulations to preserve the
environment means cars of the future have to be eco-friendly.
 This created a big challenge for auto firms that have sunk investments in the
existing traditional car manufacturing technology. In 2009, as a result of its
worldwide recall-crisis and with over 8 million vehicles addressing issues
related to ‘unintended acceleration,’ Toyota had a great lesson in keeping up
with its production and leveraging of quality, durability, safety, and reliability
issues.
 The company continued to develop innovative models to overcome
environmental regulation challenges and to add a ‘humanistic’ dimension to
consumers’ image of auto companies. Its strategic direction is to go beyond
zero environmental impact and achieve a net positive impact and
sustainability.
 Components of Strategy
 A well developed strategy consists of five components :-
 Scope
 Goals & Objectives
 Resource Deployments
 Sustainable Competitive Advantage
 Synergy
 Scope includes number and type of industries, product lines and
market segment
 Goals & Objectives includes desired level of accomplishments on
one or more dimension of performance like volume growth, profit,
return on investment
 Resource deployment includes allocation of resources among
businesses, research, product development, functional
departments
 Competitive advantage includes how organization creates
positioning to compete with its current and potential competitors
 Synergy is whole becomes greater than the sum of its parts
The 3 Major Levels of Hierarchy
of Strategies
r p or
Corporate Co e
at g
Mission
t r at e
S
y

Corporat
e Goals &
Objective
s

Corporate
Developm
ent
Strategy

Deploymen
t of
Resources
Levels of Strategies ( Business)

Strategic
Business SBU 2 SBU Nth
Unit 1

Business Deployment
Unit’s Competitiv of resources
Objective e Strategy across
s product
market and
functions
Levels of Strategies ( Functional)

Marketing Financial
Strategy Strategy
R&D
Strategy
Human
Resource

Operational
Strategy
 Nature of Strategy
 It provides an understanding of how the organization
plans to compete.
 It is the determination and evaluation of alternatives
available to an organization in achieving its objectives and
mission and the selection of appropriate alternatives to be
pursued. (Diversification, Market development, product
development, Market penetration)
 It is the fundamental pattern of present and planned
objectives, resource deployments and interactions of a
firm with markets and competitors.
 Strategy relates an organization to its external
environment. Strategic decisions are primarily concerned
with expected trends in the market, changes in government
policy, technological developments and many more
 Strategy is concerned with achieving competitive
advantage.
Nature/Characteristics of Strategic Management
Ongoing Process (Not One time)
Dynamic process (not rigid)
It is multidisciplinary: (involves marketing, finance,
human resource and operations to formulate and
implement strategy)
It is hierarchical: On the top come corporate
strategies, then come business unit strategies, and
finally functional strategies
It is multidimensional: Strategy not only tells about
vision and objectives, but also the way to achieve
them*
 Future-oriented.
 Importance of Strategy
It helps in formulating long term planning
It helps in sustainability of business
It helps in competitive advantage
It helps in collecting inputs for demand forecasting
It helps in preparing products according to the market
scenario
Protect against any internal and external environmental
change
Helps in sustaining profit for longer duration
Helps in improving effective marketing communication
Helps in optimum utilization of scarce resources
It helps in achieving organizational objectives
It helps in reducing risk
It helps in gap analysis if any
 Strategic Management Process (IIMB)
Mission – Objectives – External And Internal
Analysis – Strategic choice – Strategic
Implementation – Competitive Advantage
Mission – why the organization exist, purpose to
achieve
Objectives – Actionable and measurable goals
Home Assignment for today – Find mission of
five top organization and objectives they are
fulfilling
Enviormental strategies : it helps to analyzing the
internal and external factors that influence the
org., collecting and providing a info. for strategie
purpose.
Strategic formulation is the process of deciding
best course of action
Strategic Management Model
 Seventeen Guidelines for the Strategic-
Planning Process to Be Effective
 It should be a people process more than a paper process.
 It should be a learning process for all managers and employees.
 It should be words supported by numbers rather than numbers
supported by words.
 It should be simple and nonroutine.
 It should vary assignments, team memberships, meeting formats
and even the planning calendar.
 It should challenge the assumptions underlying the current
corporate strategy.
 It should welcome bad news.
 It should welcome open mindness and a spirit of inquiry and
learning.
Seventeen Guidelines for the Strategic-
Planning Process to Be Effective
 It should not be a mechanism.
 It should not become ritualistic, stilted (formal or unnatural way) or
orchestrated.
 It should not be too formal, predictable or rigid.
 It should not contain jargon language.( Jargon is unnecessarily complicated
language used to impress, rather than to inform, your audience)
 It should not be a formal system for control.
 It should not disregard qualitative information.
 It should not be controlled by “technicians.”
 Do not pursue too many strategies at once.
 Continually strengthen the “good ethics is good business” policy.
 Assignment 1

Date of Assignment submission: 30TH

October, 2024

1 A: Nature & Scope of Strategy

1B: Assess Air India’s strategy after
acquisition by Tata Sons
1C: Amazon’s strategy w.r.t. its competitors
General Discussion in Classroom
https://www.youtube.com/watch?v=5xD2JLleGqk
https://www.youtube.com/watch?v=tyUw0h5i9yI
https://www.youtube.com/watch?v=YIlyAOkVj8Q
 Strategic Decision Making Process
Strategic decision-making refers to identifying
the best way to achieve mission and objectives.
Strategic decision making stages:-
 Defining strategic intent
 Strategy formulation
 Strategy implementation
 Strategy evaluation & control
 Strategic intent includes vision, mission and
objectives of an organization.
 Vision is a statement that tells us where do we want
to reach in long run.
 Vision is what ultimateltly the firm like to become.
 Vision once formulated is for long lasting.
 Strategic Decision Making Process
Mission tells who we are, what we do and what we
would like to become.
Mission identifies the scope of its operation in product
and market term.
Objectives are end result of planned activity that state
what is to be accomplished by when.
Objectives state how the goals will be achieved in the
form of profit objective, marketing objective, production
objective and many more.
Strategy formulation refers to process of selecting
the most appropriate course of action for completion of
organizational goals and objectives.
Most appropriate course of action is done through
organizational and environmental appraisal using SWOT
analysis.
 Strategic Decision Making Process
Organizational appraisal is a process of observing
organizational internal environment to analyze strength
and weakness that may influence organizational ability to
achieve goals.
Strategy implementation is action stage of strategic
management.
It refers to decision that are made to implement new
strategy or reinforce existing strategy.
Strategy implementation is related to functional
implementation and behavioral implementation.
Functional planning is related to functional area like
marketing, finance, HR, operation, information
technology.
Behavioral implementation denotes mobilizing
employees to put and formulate strategies into action.
CORPORATE GOVERNANCE
 What is Corporate Governance
 According to Webster “Governance is act or process of
overseeing (supervise or watch and direct) the control and
direction of something like country or organization”.
 Corporate Governance is a continuous process of applying the
best management practices, ensuring the law is followed the
way intended and adhering to ethical standards by a firm for
effective management, meeting stakeholder responsibilities
and complying with corporate social responsibilities.
 It contains policies and rules to maintain a strong relationship
between the owners of the company (shareholders), the Board
of Directors and various stakeholders like employees,
customers, Government, suppliers and the general public.
 It applies to all kinds of organizations profit or not for profit.
 Corporate Governance
Why is corporate governance important?
 Corporate governance is important to improve the integrity ( the state
of being whole and undivided) and performance of a company.
 It gives a sustainable approach to the affairs of the organization.
 This provides an upper ground to the company and increases its
competitive advantage.
What are the elements of Corporate Governance?
The elements of corporate governance are:
 Transparent disclosure
 Well defined rights of shareholders (Equity and Debenture share
holders)
 Internal control environment
 Structured Board practices
 Board commitment
What are the four ‘P’s (Philosophies) of corporate
governance?
 The four Ps are People, Purpose, Process and Performance.
Recent Trends in Corporate Governance
 Governance regulations that are unique to India include the
mandatory requirements for board evaluation.
 Rotation of auditors, corporate social responsibility spend, one
female director and one-third independent directors and disclosure
of dividend policy.
 Stakeholder governance
 Director commitment
 Executive compensation
 Data privacy regulations
 Accuracy of ESG report
 Ethical standards
 Board and management dynamics
 E-governance & cyber security
 Composition of Board of Directors
 Brain of company.
 A panel of individuals that are elected to represent shareholders.
 Every public company is legally required to frame board of directors.
 The board is responsible for protecting shareholder's interest, establishing
policies for management and making important issues a company or
organization faces.
 Some of the responsibilities of board of directors includes creating dividend
policies, hiring and firing of senior executives specially CEO, setting
company’s goal, maintaining company’s resources, supporting executives and
their teams and ensuring that company is equipped with recent technological
tools.
 Section 149 of companies act says there must be three directors in a public
company, two in private company and one in one person company.
 Maximum number of directors should be fifteen.
 Maximum number of companies that an individual can become director is 20.
 Maximum age in case of public company is 70 years.
 Composition of Board of Directors
 It is mandatory for company to appoint at least one director who has
lived in India for a minimum of 182 calendar days of the previous
year shall be appointed by every company’s board.
 At least one women director must be appointed by company.
 All listed companies must have one third proportion of their board of
directors as independent directors.
 Independent Director means a director who is not connected or
associated with the Company in any manner and works only to
safeguard the interest of the members who individually cannot look
after their interest.
Committees Under the Board of Directors
 Audit Committee
 Nomination and Remuneration Committee
 Stakeholders Relationship Committee
 Risk Management Committee
 Composition of Board of Directors
Audit Committee
 An audit committee is a group of board members that oversee a company’s financial reporting,
internal controls and audit activities.
 Audit committees are responsible for ensuring that a company’s financial statements are accurate
and reliable
 The audit committee should have a minimum of 3 members.
 A total of two-thirds of the committee comprises of independent directors.
 At least one member should have expertise in the field of account and finance and all audit
members must be well in finance.
 An independent director will be the chairman of the audit committee.
 The company secretary shall be the appointed as secretary.
Nomination and Remuneration Committee
This committee ensures that companies are led by competent and motivated leaders who have the
interests of shareholders and stakeholders in mind.
 The committee shall comprise of at least three directors.
 All members must be non-executive directors.
 At least 50% of the directors shall be non-executive members.
 Director of the committee will be an independent director.
 https://www.indiacode.nic.in/show-data?
actid=AC_CEN_22_29_00008_201318_1517807327856&orderno=182
 Composition of Board of Directors
A non-executive director is a member of a company's board of directors
who is not part of the executive team, generally an outsider and not
engaged in the day to day management of the organization but involved in
policy making and planning exercises.
Stakeholders Relationship Committee
 The Stakeholders Relationship Committee takes care of all issues related to
problems such as grievances of shareholders, debenture holders and other parties
of importance. This committee looks into such matters and resolve issues while
maintaining a good relationship with shareholders and other parties.
 Thus, the chairman of this committee has to be a non-executive member director
from among the board of directors.
Risk Management Committee
 The members of the board will form the risk management committee.
 A major portion of the Risk Management Committee shall consist of members
of the board.
 The chairman of the Risk Management Committee shall be a member of the
board.
 Regulators that provides framework for
Corporate Governance in India
 Ministry of Corporate Affairs
 Companies Acts (CA) 2013
 SEBI (Securities and Exchange Board of India) Guidelines
 Standard Listing Agreement of Stock Exchanges
 Institute of Chartered Accountant of India (ICAI)
 Institute of Company Secretaries of India (ICSI)
 CII (Confederation of Indian Industry)
 Class work:
www.adidas-group.com/en/investors/corporate-governance/corp
orate-governanceoverview
.
https://www.mca.gov.in/Ministry/reportonexpertcommitte/
chapter4.html
Corporate Social Responsibility
 Corporate Social Responsibility
Responsibility taken by the corporate towards the
betterment of society as a whole.
CSR is the continuing commitment by business to
behave ethically and contribute to economic
development while improving the quality of the life of
the workforce and their families as well as of the local
community and society at large.
Under Companies Act 2013 Section 135 (1)
Schedule 7 : Activities to be conducted
Conditions: Turnover 1000 Crore or Net Profit 5 Crore
during financial years.
2% of Avg. net profit of immediately preceding 3 years.
Activities carried out in India only.
 Corporate Social Responsibility Committee

If expenditure is 50 Lakh or more then there is a requirement

of CSR committee.
CSR committee is formed with 3 directors and 1 independent
director.
In case of foreign companies 2 persons (1 resident of India
and 1 nominated by company)
 Levels of Corporate Social Responsibility

There are four levels of CSR:-

Economical (Companies have an economic
responsibility to be profitable so they can
provide return on investment (ROI) to their
owners and investors, create jobs for the
community and contribute goods and services to
the economy)
Legal
Ethical
Philanthropic
Areas of Corporate Social Responsibility
PM Cares Fund
Environment protection
Promoting education
Women Empowerment
Eradicating hunger and malnutrition
Eradicating poverty
Armed force widower pension
Rural sports
New Drug Invention
National Heritage protection
Consequences of Not Following Corporate
Social Responsibility
Fine of 50K to 25 Lakhs
Officer in default: 3 years imprisonment

https://timesofindia.indiatimes.com/blogs/voices/the-future-
of-csr-in-a-changing-world/