2. OBJECTIVES
Discuss the concept of strategy
Describe the importance of strategy
Explain different types of strategies
Detail upon the concept of strategic management
Learn the role of strategic management
Outline the concept of strategic planning
3. INTRODUCTION
A strategy refers to the direction and scope of an organization in the long run. In other words, a strategy can be defined
as a set of decision making procedures to be followed by an organization to accomplish its goals and objectives. It helps
an organization to cope with the dynamic business environment. Therefore, an organization needs to pay a lot of attention
and supervision, while formulating its different strategies. Strategic management is an ongoing process of formulating,
implementing, and evaluating strategies to achieve long-term organizational objectives. The strategic management
process also helps an organization to update its strategies with respect to changes taking place in the business
environment. Strategic planning is one of the most important aspects of the strategic management process. It involves
defining strategies and allocating resources for the implementation of those resources. Strategic planning also includes
assessing the strengths, weaknesses, opportunities, and threats in the business environment of an organization.
Therefore, the overall success of the strategic management process depends on the effectiveness of strategic planning.
4. CONCEPT OF STRATEGY
A strategy refers to a plan of actions to achieve a specific target. It includes steps, actions,
standards, plans, and policies required to attain future goals of an organization.
The objectives of strategy are as follows:
Providing direction and stability to the organization
Determining long-term goals of the organization
Helping the organization to prioritize the targets on the basis of organizational resources
Facilitating the planning and execution of long-term, medium-term, short-term, and day-to-day plans
Facilitating the decision-making process
Allocating the resources to various departments, such as marketing, human resource, finance, and
operations, of the organization
Increasing the organizational effectiveness by making judicious use of organizational resources, such as
funds, human resources, technology, and infrastructure
Defining the code of conduct that lays down various rules and policies for an organization
5. STRATEGIC BUSINESS UNITS AND ITS
TYPES
Strategic Business Units (SBUs) refer to units
that have their own sets of strategies,
objectives, and competitors.
The two types of SBUs are as follows:
Single-level SBUs: Imply a single business unit
that deals in a single product or one area.
Multiple-level SBUs: Imply the business units of
an organization that are divided according to
geographical areas or products.
6. LEVELS OF STRATEGY
The different levels of strategy are explained as
follows:
1. Corporate-Level Strategy: Includes strategies
designed by the top management consisting of
board of directors and the chief executive officer.
2. Business-Level Strategy: Involves the strategies
designed by the business heads of each SBU.
3. Functional-Level Strategy: Involves the strategies
designed by functional managers to carry out day-
to-day activities of an organization.
7. DEFINE STRATEGIC MANAGEMENT
Strategic management is an ongoing process that evaluates and
controls the business and the industries in which the company is
involved; assesses its competitors and sets goals and strategies to
meet all existing and potential competitors; and then reassesses each
strategy annually or quarterly [i.e. regularly] to determine how it has
been implemented and whether it has succeeded or needs
replacement by a new strategy to meet changed circumstances, new
technology, new competitors, a new economic environment, or a new
social, financial, or political environment. ---- Lamb
Strategic management is a system that links strategic planning and
decision-making with day-to-day business of operational management.
---- Gluck, Kaufman, and Walleck
8. COMPONENTS OF STRATEGIC
MANAGEMENT
Vision: Gives a long-term view of the organization. It focuses on what an
organization is trying to achieve in the long run.
Mission: Describes the scope and purpose of an organization.
Objectives: Refer to the results that an organization seeks to achieve in the
short and long run.
Policies: Refer to guidelines given to managers and subordinates for guiding
their decisions and actions, while implementing the organization’s strategy.
External Environment: Consists of the factors that affect the organization’s
activities.
Grand Strategy: Implies a package of different long-term strategies.
9. PROCESS OF
STRATEGIC MANAGEMENT
The different stages of strategic management process are
as follows:
1. Establishment of Strategic Intent: Lays down the foundation for
strategic management of the organization.
2. Formulation of Strategies: Refers to the development of
strategies of an organization
3. Implementation of Strategies: Implies a process of putting
formulated strategies into action.
4. Strategic Evaluation and Control: Refers to the process of
comparing the actual results with the desired performance.
10. SCHOOLS OF THOUGHTS IN STRATEGIC
MANAGEMENT
Mintzberg has given 10 schools of thoughts on strategy formation, which are as follows:
Design School: Refers to an approach that treats strategy formation as a simple and informal process.
Planning School: Treats strategy formation as a formal process, where strategy is divided into sub-strategies
and programs.
Positioning School: Perceives strategy formation as an analytical, systematic, and deliberate process.
Entrepreneurial School: Treats strategy formation as a visionary process that involves experience, intuition,
judgment, and insight of an entrepreneur.
Cognitive School: Analyzes how people perceive information in an organization.
Learning School: Sees strategy formation as an emergent and informal process.
Power School: Treats strategy formation as a process of negotiation.
Cultural School: Involves a collective, ideological, constrained, and deliberated perspective for the process of
strategy formation in an organization.
Environmental School: Recognizes strategy formation as a reactive process.
Configuration School: Identifies strategy formation as a transformation process that involves changing one
type of decision-making structure of an organization into another.
11. STRATEGIC MANAGEMENT IN MARKETING
Marketers try to possess strategic thinking and improve the value
of the organization by developing effective marketing plans.
They achieve vision and mission of the organization with the help
of the marketing strategies, such as:
Enhances customer loyalty by retaining them
Expands the channels of distribution of the organization
Increases sales of the organization by penetrating in the market
Understands the customers and competitors; adapts to the changing
environment
Aims at relationship marketing with the clients
12. STRATEGIC MANAGEMENT IN FINANCE
Organizations aim at achieving maximized returns on the funds
invested and gain financial success through effective strategies.
The financial strategies relate to the following:
Allocating least cost combinations of capital resources
Taking investment decisions, which maximize the net present value
and shareholder wealth
Identifying scarce financial resources and balancing them effectively
Raising funds for the organization through issue of shares
Conducting cash, credit and risk management
13. STRATEGIC MANAGEMENT IN HUMAN
RESOURCE
Human resource and top management work together for achieving
business strategies.
The strategic management policies for human resource relate with the
following:
Developing high quality workforce by hiring and retaining talented people
Enabling employee participation for achievement of the objectives
Ensuring special motivational programs for employees
Establishing performance targets for employees
Measuring the performance related to targets
Providing appraisal systems, training and development to employees
14. CONCEPT OF STRATEGIC PLANNING
Strategic planning includes a comprehensive planning
process to achieve long-term goals of the organization.
The features of strategic planning are as follows:
Deals with the future decisions of an organization
Aligns long-term plans with short-term plans
Assists in developing strategic intent and action plans of an
organization
Identifies new areas of investment for the organization
Ensures rational allocation of resources
