Fundamentals of strategic management

2. STRATEGIC MANAGEMENT MODEL

3. COMPANY MISSION
COMPANY PROFILE
EXTERNAL
ENVIRONMENT-
operating, industry
and multinational
analysis
STRATEGIC ANALYSIS AND CHOICE
LONG TERM
OBJECTIVES
GRAND STRATEGY
ANNUAL
OBJECTIVES
FUNCTIONAL
STRATEGIES
POLICIES
INSTITUTIONALISING THE
STRATEGY
CONTROL AND EVALUATION

4. “ The set of decisions and actions resulting in
formulation and implementation of strategies
designed to achieve the objectives of an
organization”

5.  Determining the mission of the company including
broad statements about its purpose, philosophy and
goals.
 Developing a company profile that reflects internal
conditions and capabilities.
 Assessment of the company’s external environment in
terms of both competitive and contextual factors.
 Analysis of possible options uncovered in the matching
of the company profile with the external environment.

6.  Identifying the designated options uncovered
when possibilities are considered in light of the
company mission.
 Strategic choice of a particular set of long term
objectives and grand strategies needed to
achieve the desired options.
 Development of annual objectives and short
term strategies compatible with long term
objectives and grand strategies.

7.  Implementing strategic choice decisions
based on budgeted resource allocations and
emphasizing the matching of tasks, people,
structures, technologies and reward systems.
 Review and evaluation of the success of
strategic process to act as a basis for control
and as an input for future decision making.

8. By Strategy managers mean “Their large scale
, future oriented plans for interacting with the
competitive environment to optimize the
achievement of organization objectives.”
Thus Strategy represents a firm’s “GAME
PLAN”

9. Strategic issues have 6 identifiable
dimensions :
 They require top management decisions.
 They are likely to have a significant impact on
the long term prosperity of the firm.
 They involve the allocation of large amount of
company resources.

10.  They are future oriented.
 They usually have major multifunctional or
multibusiness consequences.
 They necessitate considering factors in the
firm’s external environment.
3 LEVELS OF STRATEGIES
 Corporate level
 Business level
 Functional level

11. Corporate and business level managers
focus their planning on ‘Doing the right
things’. The Functional level managers focus
on ‘Doing things right’.

12.  Corporate level Decisions
Choice of Business, dividend policies,
Sources of long term financing, priorities for
growth etc….
 Business level Decisions
Plant location, Marketing segmentation and
geographic coverage and Distribution channel
 Functional level Decisions
Generic versus brand name labeling, Basic
versus applied R&D, High versus low inventory
levels, General versus specific purpose
production equipment, Close versus loose
supervision.

13. Studies have revealed that changes in
the company’s strategic direction can lead to
significant improvements in its profitability. The
PIMS (Profit impact of market Studies) which
studied the effects of strategic planning on a
firm’s ROI revealed that ROI was most
significantly affected by market share,
investment intensity and corporate diversity.
The strategic management approach
emphasizes interaction by managers at all levels
of the organizational hierarchy in planning and
implementation. This participative decision
making leads to certain behavioral effects that
can improve the welfare of the firm.

14.  Strategy formulation activities should enhance the
problem prevention capabilities of the firm.
 Group based strategic decisions are most likely to
reflect the best available alternatives.
 Employee motivation should improve as employees
better appreciate the productivity- reward relationships
inherent in every strategic plan.
 Gaps and overlaps in activities among diverse
individuals and groups should be reduced as strategy
formulation leads to a clarification of role
differentiations.
 Resistance to change should be reduced.

15.  Costly in terms of hours spent by managers in
the planning exercise, also the
division’s/department's productivity may be
affected due to the absence of senior
managers.
 If formulators of strategy are not intimately
involved in implementation, individual
responsibility for input to the decision process
and subsequent results can be affected.
 Strategic managers must be trained to
anticipate, minimize or constructively respond
when participating subordinates become
disappointed or frustrated over unattained
expectations.

16. i) Lack of accuracy
ii) Danger of Rigidity
iii) Internal Resistance
iv) Difficult Exercise

17. v) Costly Exercise
vi) Ineffective to overcome Current Crises
vii)Complex and Dynamic Environment
ix) Inadequate Appreciation of Strategic
Management

18.  Stake Holders
People who are affected by a firm’s
performance and who have claims on its
performance.

19. 1. Capital Market Stak baeholders
Stockholder, supplies of capital like banks,
2.Product Market Stakeholders
Primary customers, suppliers,host communities ,
Union

20. 3. Organizational Stakeholders
Employees, Managers, Officers

21. The concept of strategic intent, popularized by
Gary Hamel and C.K.Prahalad, refers to the
purpose of the organization and the ends it
wishes to pursue.

22. The Strategic intent of the firm represents the
organization’s belief about its state of the
future.

24. A Vision is more dreamt of than it is
articulated.
That is the reason why it is difficult to say,
what
vision an organization has.

25.  It may not be evident even to the
entrepreneur who usually thinks of the vision.
It is a powerful motivator to action.
And it is from the actions that a vision could
often be derived.

26. I)Graphic
II)Directional
III)Focused
IV)Flexible

27. V)Feasible
VI)Desirable
VII)Easy to Communicate

28.  Key decisionmaker’s philosophy and visionary
Long term concept of the organization
Taken together define organization mission
in the form of desires, beliefs and
assumptions .

29. Key Decision makers
policy
Visionary Long
term Concept
Organizational Mission

30. The company mission is defined as
“The fundamental, unique purpose that sets a
business apart from other firms of its type
and identifies the scope of its operations in
product and market terms.”
It describes the product, market and
technological areas of emphasis for the
business in a way that reflects the value and
priorities of strategic decision makers.

31. The company mission is designed to accomplish
the following :
 To ensure unity of purpose within the
organization.
 To provide a basis for motivating the use of the
organization’s resources.
 To develop a basis or standard for allocating
organization’s resources.
 To establish a general tone or organizational
climate to suggest a business like operation.

32.  To serve as a focal point for those who can
identify with the organization’s purpose and
direction and to deter those who cannot from
participating further in the organization’s
activities.
 To facilitate the translation of objectives and
goals into a work structure involving
assignment of tasks and responsibilities within
the organization.
 To specify organizational purpose and the
translation of this purpose into goals in such a
way that cost, time and performance
parameters can be assessed and controlled.

33. The mission statement embodies the following
elements :
 The basic product or service to be offered, the
primary markets or customer groups to be
served and the technology to be used in
production or delivery.
 The fundamental concern for survival through
sustained growth and profitability.
 The managerial philosophy (company
philosophy) in terms of basic beliefs, values,
aspirations and philosophical priorities (what
the company stands for)

34.  The public image to be sought and
 The self-concept that people affiliated should
have of the firm, which may include
management style and work ethic.
EXAMPLE
 We are responsible for the communities in
which we live and work and to the world
community as well. (Johnson & Johnson)

35.  We are dedicated to the total success of
Corning glass works as a world wide
competitor. (Corning Glass)
 To stimulate, continue and accelerate efforts to
develop and maximize the contribution of the
energy sector to the economy of the country.
(ONGC)
 Dayton-Hudson corporation is a diversified
retailing company whose business is to serve
the American consumer through the retailing of
fashion oriented quality merchandise.

36. When a specific business attempts to
define its mission so as to incorporate the
interests of various claimant groups, 4 steps
must be taken :
o Identification of claimants.
o Understanding claimants’ specific demands
vis-à-vis the company.
o Reconciliation and prioritisation of the claims.
o Coordination of claims with other elements of
the mission.

37. Company
Mission
INSIDE CLAIMANTS
Executive
Officers
Board of Directors
Stock Holders
Employees
OUTSIDE CLAIMANTS
Customers
Suppliers
Govt
Unions
Competitors
Local Committees
General Public

38. Once the organization mission has been
determined, its objectives, desired future positions or
destination that it wishes to reach, should be identified.
Organizational objectives are defined as ends which the
organization seeks to achieve by its existence and
operation.
Objectives may be classified into 2 categories :
 EXTERNAL INSTITUTIONAL OBJECTIVES
Define the impact of the organization on its
environment.
Eg: To develop a high degree of customer confidence by
sustaining high standards of excellence in product
quality.

39.  INTERNAL INSTITUTIONAL OBJECTIVES
Define how much is expected to be
achieved with the resources that the
organization commands.
Eg: To raise the average ROI to 15% per annum.

40.  Define the future state of affairs which the
organization strives to realize.
 Are the the rationale of what the organization
does.
 Govern the behavior of employees by directing
their attention to desirable conduct and
behavior.
 Govern decision making and reduce conflict by
providing a frame of reference.
 Provide the ultimate standards against with the
success of the organization can be measured.

41. Goals are the specific, time based
point of measurement. Thus goals are to be
stated specifically and as quantitatively as
possible while objectives may be stated in
quantitative or qualitative terms.
SETTING GOALS AND OBJECTIVES
Setting goals and objectives is the
first step in the strategic planning process. It
involves defining the desired relationship
between the organization and its environment.
As changes occur in the organization, the
environment or both, there is a need for
redefinition of goals.

42.  The external environment.
 The top management’s relationship with other
individuals and groups in the organization.
 The ability of the management to cope with the
environmental risks and threats.
 Values and preferences of the executives –
attitude towards risk taking, innovation, towards
people, social issues, ethics etc…

43. Goal setting involves a process of
reconciliation of diverse needs of various
interest groups.
Sometimes change of objectives may be
necessary due to :
 Change in aspiration level of management.
 Demand for change by coalition groups.
 Change in the normal life cycle of
organizations.
 Effects of crisis situation.

44. When framing organizational objectives, the
strategists must identify the key factors that
must be kept in view to ensure the success of
organization. They are termed as Critical Success
Factors (CSFs) or Strategic Factors or Key Success
Factors (KSFs).
STEPS INVOLVED IN CSFs AND GOAL SETTING
• Generate the CSFs .
• Refine the CSFs into objectives.
• Identify the measures of performance.
These steps involve considering various
factors that can influence the performance and
their priorities and what to focus on.

45. Three Dimensions for Defining a Business
Customer Functions
Customer Groups Alternative
Technologies

46. A company’s business model is management’s
story line for how and why the company’s
product offerings and competitive approaches
will generate a revenue stream and have an
associated cost structure that produces
attractive earnings and return on investment.

47. Technical
Inputs
Business
Model
Economic
Outputs

48.  Corporate governance is the set of process,
customers, polices, laws and institutions
affecting the way a company is directed,
administrated and controlled.

49.  It is a system by which companies are run,
and
the means by which they are responsive to
their
shareholders, employees, and Society.

50. i) Creation and Enhancement of a company’s
Competitive advantage
ii) Enabling the company to perform efficiently by
preventing fraud and malpractices
iii) Providing protection to shareholder’s interest

51. iv) Enhancing the valuation of an enterprise
v) Ensuring Compliance of laws and regulations