file_StrategicManagement_Module-1_ GU.ppt

School of Business
Course Code: MBDS6003 Course Name: Strategic Management
Module 1:Introduction to Strategic Management
Name of the Faculty: Dr. M C Rashid Program Name: MBA

School of Business
MBDS6003 Course Outcomes
Name of the Faculty: M C Rashid Program Name: MBA
CO No. Course Outcomes
CO1 Illustrate the basic concepts of strategic management and explain strategic
management process. K2
CO2 Analyse the environmental factors for planning suitable strategies to take
appropriate decisions. K3
CO3 Formulate appropriate and innovative strategies and programs/action plans
to address the strategic issues and to achieve the company's objectives K6
CO4 Examine the relationship between strategy and structure and
implementation strategy effectively. K5
CO5 Adept to change for the growth and expansion of the organization K6

School of Business
Topics to be Covered
• Nature and scope of strategic management
• The origin of strategic Management
• Strategic Management process
• Strategic framework
• Strategic Thinking

Strategic questions
• Where do you want to go from here? What do you want to
accomplish? ...
• What obstacles will you have to overcome? What problems will you
have to solve? ...
• What additional knowledge, skills, or resources will you require to
achieve your strategic objectives?

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What is Strategy?
• The dictionary meaning of strategy is a plan of action designed to achieve a long-
term goal. But in the context of organizations this definition needs to be
reworked.
• “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” is what strategy is all about.
• “Strategy is a deliberate search for a plan of action that will develop a business’s
competitive advantage and compound it.” Bruce Henderson
• Strategy has the ability to create unique and valuable position that is not easily
imitated by others and therefore Strategy is what allows a firm to create and
protect its competitive advantage. Porter

Concept
• Strategy (from Greek στρατηγία stratēgia, "art of troop
leader; office of general, command, generalship") is a
general plan to achieve one or more long-term or overall goals
under conditions of uncertainty.
• Igor Ansoff (1918-2002) was the father of modern strategic
thinking.

Elements of strategy
• Step 1: Environmental Scan. ...
• Step 2: Internal Analysis. ...
• Step 3: Strategic Direction. ...
• Step 4: Develop Goals and Objectives. ...
• Step 5: Define Metrics, Set Timelines, and Track Progress. ...
• Step 6: Write and Publish a Strategic Plan. ...
• Step 7: Plan for Implementation and the Future.

Five 5 forms of strategy and Fundamentals of Strategy
They are Plan, Ploy, Pattern, Position, and Perspective.
A coherent strategy should include four separate and distinct
components: long-term goals, a defined scope, a description
of your competitive advantage and, finally, the logic by
which you plan to achieve your goals

Elements of Strategy
• An effective strategy contains these key elements: Arenas,
Differentiators, Vehicles, Staging, and Economic Logic. It’s important
to consider each of the five elements in the Strategy Diamond Model
below because they are all interrelated and mutually reinforcing.

Arenas
• What do we plan to achieve? What is the nature of our products,
services, distribution channels, and market segments? What
geographic areas do we plan to expand into? What technologies will
we use?

Differentiators:
• What sets us apart from our competition? Is it an image, price,
product dependability, and how quickly we get our product to the
marketplace? How will we win the marketplace?

Vehicles:
• How will we get there? Will we get there through strategic alliances?
Development? Licensing?

Staging and Economic logic:
• How will we advance our product or positioning? How quickly will we
move? In what order we will move forward?
• How will we obtain our returns? Will this be achieved by lowering
costs to give value for the price? Providing premium services for
premium pricing?

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Strategic Management
• Strategic Management as “The field that deals with the major intended
and emergent initiatives taken by general managers on behalf of
owners, involving utilization of resources to enhance the performance
of the firm in their external environments.” Nag, Hambrick & Chen

School of Business
What is Strategic Management?
• Strategic management is a set of management decisions and actions
that determines the long run performance of a corporation.
• Strategic Management is an art and science of formulating,
implementing, and evaluating cross functional decisions that enable
an organization to achieve its objectives. Fred R David
• Strategic Management is defined as the set of decisions and actions
that result in formulating of strategy and its implementation to
achieve the objectives of the corporation. Channon

School of Business
Origin of Strategic Management
• The word ‘strategy’ has entered in the field of management from
military where it refers to apply the forces against an enemy to win a
war.
• Originally, the word strategy has been derived from Greek ‘strategos’
which means generalship.
• The word was used first time around 400 BC. The word strategy
means the art of the general to fight in war.

School of Business
Origin of Strategic Management
• War and strategy are not new concepts, what is new is the increased
emphasis of strategy in business context.
• Igor Ansoff pioneered the concept of strategy. Later Henry Mintzberg
Peter Drucker and Michael E Porter enriched the concept of strategic
management with their original insights.

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What is Strategic Decisions
• Strategic decisions are typically characterized by the following
features:
• Strategic decisions:
• Tend to have a long-term orientation.
• Focus on the “Big Picture”.
• Have significant cross-functional implications.
• Involve a significant commitment of resources.
• Are not easily reversible.
• Involve a conscious choice of what to do and what not to do.

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Essence and Nature of Strategy
• Strategy includes the determination and evaluation of alternative
paths to an already established mission or objective and Eventually,
choice of the alternative to be adopted.
• Strategy is characterized by four important aspects.
• Long term objectives
• Competitive Advantage
• Vector
• Synergy

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Strategy Vs Tactics
Strategy: Broad plan of action by which an organization intends to reach its
objectives and fulfill its mission.
Example: Our strategy is to grow sales and profits of our existing products and to
broaden our business by introducing new products
Tactics : Action plans devised for guiding the implementation of activities
specified in the strategic plan.
Example: Company will use its widespread distribution via Delhi supermarkets to
increase sales by introducing new products.
• Examples
• Strategy: Direct our promotion to males, ages 25-40.
• Tactics: Advertise to the magazines read by this market segment, Sponsor event
watched on TV by this segment.

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Strategy V/S Policies
• Policies
• Strategies

School of Business
Course Code: Course Name: Strategic Management
Name of the Faculty: Dr. M C Rashid Program Name:MBA
LEVELS OF STRATEGY
• It is believed that strategic decision making is the responsibility of top
management.
• However, it is considered useful to distinguish between the levels of
operation of the strategy. Strategy operates at different levels:
• Corporate Level
• Business Level
• Functional Level

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Corporate Level Strategy
The Corporate Level:
 It determines what businesses a company should be in or wants to be
in. Corporate strategy determines the direction that the organization
is going and the roles that each business unit in the organization will
plan in pursuing that direction.
Setting the overall structure, systems and processes
 It covers actions dealing with the objective of the firm, acquisition,
allocation of resources, decision related to start new business or
eliminate existing business and coordination of strategies of various
SBUs for optimal performance etc.
 Top management of the organization makes such decisions.

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Business Level Strategy
The Business Unit Level :
It determines how an organization should compete in each of its
businesses.
Identifying competitive advantage
Selecting key success factors
 Allocation of funds and various tasks to each business unit.
 Making each business unit profitable.
Example: Reliance Industries Limited operates in textile fabrics, yarns,
fibers, and a variety of petrochemical products. For each product group,
the nature of market in terms of customers, competition, and marketing
channel differs

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Functional Level Strategy
• The Functional Level
• Coordination of company departments to support achievement of
Corporate and SBU objectives.
• Functional strategy deals with specific function, allocation of
resources among different operations within that functional area and
coordination between them
• For example, marketing strategy, a functional strategy, can be
subdivided into promotion, sales, distribution, pricing strategies
with each sub function strategy contributing to functional strategy.

School of Business
Course Code: BHMH 4026 Course Name: Strategic Management
Importance of Strategy
• Strategy provides various benefits to its users:
• Strategy helps an organization to take decisions on long range forecasts.
• It allows the firm to deal with a new trend and meet competition in a effective
manner.
• With the help of strategy, the management becomes flexible to meet unanticipated
future changes.
• Efficient strategy formation and implementation result into financial benefits to the
organization in the form of increased profits.
• Strategy provides focus in terms of organizational objectives and thus provides clarity
of direction for achieving the objectives.
• Organizational effectiveness is ensured with effective implementation of the strategy.

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What is Strategic Planning?
• “Strategy” creates a common understanding of what the enterprise wants
to achieve and what it needs to do to achieve it. Strategic plans bridge the
gap from that overall direction to the specific projects and day-to-day
actions that ultimately execute the strategy.
• The primary purpose of the planning process is to help companies set goals
and have an actionable plan to achieve those goals. There may be a plan in
place that covers the goals of the entire organization, but there may also
be plans individual managers design and implement with their teams.
• The strategic planning process is integral to a company’s long-term success.
With a strategic plan in place, a business can more effectively focus its
energies and resources on achieving a goal.

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Strategic Management Process
• Defining Strategic Intent
• Strategy Formulation
*Environmental and Organizational Analysis
*Identification of Strategic Alternatives, Choice of Strategy
• Implementation of Strategy
• Evaluation and Control

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STRATEGIC INTENT
• Core Values
• Vision
• Mission
• Objectives
• Policies
• Business Definition
• Business Model

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Core Values
• Core Values are the essential and enduring tenets of an
organization.
• They may be beliefs of top management regarding employees welfare,
costumer’s interest and shareholder’s wealth.
• The beliefs may have economic orientation or social orientation.
• Evidences clearly indicate that the core values of Tata’s are different
from core values of Birla’s or Reliance.
• The entire organization structure revolves around the philosophy
coming out of core values.

Defining the Business Vision
• Business Vision
• A well conceived vision comprises two main components.
• 1. Core ideology: what we aspire to become, to achieve, to create,
• 2. An envision future
• Vision guides a business and its intentions for the future.
• A vision is where a company expect to be in future.
• Vision should reflect the concerns of stakeholders such as share holders,
customers, the local community and society in order to be effective.
• “A computer on every desk in every home” (Microsoft)
• ‘Our purpose is to be the global leader in nourishing people’ (Cargill)
32

Defining the Mission
• Mission statement is a broad statement of corporate purpose as it
explains the existence of corporate entity and what it wants to
accomplish
• It provides direction to the entire organization
• What is our business? What will it be? And what should it be?
• These questions determine the purpose of the mission.
• A mission statement addresses the organizations fundamental reason
for existing and specify the functional role that the organization is
going to adopt in its market place.

issues in Strategic Decisions
• 1. Understand changing customer behavior
• 2. Maximise customer influence
• 3. Differentiate the business
• 4. Reflect the context

Competitive Advantage
• A competitive advantage is anything that gives a company an
edge over its competitors, helping it attract more
customers and grow its market share. A competitive
advantage can take three primary forms: Cost advantage–
producing a product or providing a service at a lower cost than
competitors

•The four primary methods of gaining a
competitive advantage are cost leadership,
differentiation, defensive strategies and strategic
alliances.

core competency
• Typically, a core competency refers to a company's set of skills or
experience in some activity, rather than physical or financial assets.
An organizational core competency is an organization's strategic strength.

3 main core competencies?
•Competencies fall into three main categories:
Core, Cross-functional and Functional. All are
important, but there is a hierarchy

• Strategic management process is a method by which managers
conceive of and implement a strategy that can lead to a sustainable
competitive advantage.[1]
• Strategic planning process is a systematic or emerged way of
performing strategic planning in the organization through initial
assessment, thorough analysis, strategy formulation, its
implementation and evaluation.

Rothaermel’s The Analysis-Formulation-Implementation (AFI) Strategy

Thompson’s and Martin’s Strategic
Management Framework

Components of strategic planning process
• There are many components of the process which are spread throughout
strategic planning stages. Most often, the strategic planning process has 4
common phases: strategic analysis, strategy formulation, implementation and
monitoring ,David, Johnson, Scholes & Whittington, Rothaermel, Thompson and
Martin. 5 stages of strategic planning process:
• Initial Assessment
• Situation Analysis
• Strategy Formulation
• Strategy Implementation
• Strategy Monitoring

Initial Assessment
• The starting point of the process is initial assessment of the firm. At
this phase managers must clearly identify the company’s vision and
mission statements.
• Business’ vision answers the question: What does an organization
want to become? Without visualizing the company’s future, managers
wouldn’t know where they want to go and what they have to achieve.
Vision is the ultimate goal for the firm and the direction for its
employees.

Situation Analysis
• When the company identifies its vision and mission it must assess its
current situation in the market. This includes evaluating an
organization’s external and internal environments and analyzing its
competitors.
• During an external environment analysis managers look into the key
external forces: macro & micro environments and competition. PEST
or PESTEL frameworks represent all the macro environment factors
that influence the organization in the global environment. Micro
environment affects the company in its industry. It is analyzed using
Porter’s 5 Forces Framework.

• Competition is another uncontrollable external force that influences
the company. A good example of this was when Apple released its
IPod and shook the mp3 players industry, including its leading
performer Sony. Firms assess their competitors using competitors
profile matrix and benchmarking to evaluate their strengths,
weaknesses and level of performance.

Strategy Formulation
• Successful situation analysis is followed by creation of long-term
objectives. Long-term objectives indicate goals that could improve the
company’s competitive position in the long run. They act as directions
for specific strategy selection. In an organization, strategies are
chosen at 3 different levels:

• Internal analysis includes the assessment of the company’s resources,
core competencies and activities. An organization holds both tangible
resources: capital, land, equipment, and intangible resources: culture,
brand equity, knowledge, patents, copyrights and trademarks
(Rothaermel, p. 90)[1]. A firm’s core competencies may be superior
skills in customer relationship or efficient supply chain management.
When analyzing the company’s activities managers look into the value
chain and the whole production process.

• Business level strategy. This type of strategy is used when strategic
business units (SBU), divisions or small and medium enterprises select
strategies for only one product that is sold in only one market. The
example of business level strategy is well illustrated by Royal Enfield
firms. They sell their Bullet motorcycle (one product) in United
Kingdom and India (different markets) but focus on different market
segments and sell at very different prices (different strategies). Firms
may select between Porter’s 3 generic strategies: cost leadership,
differentiation and focus strategies. Alternatively strategies from
Bowman’s strategy clock may be chosen (Johnson, Scholes, &
Whittington, p. 224).

• Corporate level strategy. At this level, executives at top parent
companies choose which products to sell, which market to enter and
whether to acquire a competitor or merge with it. They select
between integration, intensive, diversification and defensive
strategies.
• Global/International strategy. The main questions to answer: Which
new markets to develop and how to enter them? How far to
diversify? (Thompson and Martin, p. 557[2], Johnson, Scholes, &
Whittington

• Managers may choose between many strategic alternatives. That
depends on a company’s objectives, results of situation analysis and
the level for which the strategy is selected.

Strategy Implementation
• At this stage managerial skills are more important than using analysis.
Communication in strategy implementation is essential as new
strategies must get support all over organization for effective
implementation. The example of the strategy implementation that is
used here is taken from David’s book, chapter 7 on
implementation[5]. It consists of the following 6 steps:

• Setting annual objectives;
• Revising policies to meet the objectives;
• Allocating resources to strategically important areas;
• Changing organizational structure to meet new strategy;
• Managing resistance to change;
• Introducing new reward system for performance results if needed.

• The first point in strategy implementation is setting annual objectives
for the company’s functional areas. These smaller objectives are
specifically designed to achieve financial, marketing, operations,
human resources and other functional goals. To meet these goals
managers revise existing policies and introduce new ones which act as
the directions for successful objectives implementation.

• The other very important part of strategy implementation is changing
an organizational chart. For example, a product diversification
strategy may require new SBU to be incorporated into the existing
organizational chart. Or market development strategy may require an
additional division to be added to the company. Every new strategy
changes the organizational structure and requires reallocation of
resources. It also redistributes responsibilities and powers between
managers. Managers may be moved from one functional area to
another or asked to manage a new team. This creates resistance to
change, which has to be managed in an appropriate way or it could
ruin excellent strategy implementation.

Strategy Monitoring
• Implementation must be monitored to be successful. Due to
constantly changing external and internal conditions managers must
continuously review both environments as new strengths,
weaknesses, opportunities and threats may arise. If new
circumstances affect the company, managers must take corrective
actions as soon as possible.
• Usually, tactics rather than strategies are changed to meet the new
conditions, unless firms are faced with such severe external changes
as the 2007 credit crunch.

Stakeholders: Classification of Stakeholders

• First, identification and classification of stakeholders will ensure that
no one is forgotten. Second, consideration of their likely influence
over or interest in the project will start to suggest an approach to
their engagement. Third, stakeholders can be divided into groups
based on their levels of involvement.

• The major stakeholders in a corporation usually include its customers,
employees, investors, suppliers, and the local community.

Objectives
• Objectives refer to the ultimate end results which are to be
accomplished by the overall plan over a specified period of time.
• The vision, mission and business definition determine the business
philosophy to be adopted in the long run. The goals and objectives are
set to achieve them.

Policies
• A policy is a broad guideline for decision making that links the
formulation of a strategy with its implementation.
• Companies use policies to make sure that employees
throughout the firm make decisions and take actions that
support the corporation’s mission, objectives, and strategies.

Business Definition
• A business is defined as an organization or enterprising entity
engaged in commercial, industrial, or professional activities.
• Businesses can be for-profit entities or they can be non-profit
organizations that operate to fulfill a charitable mission or further a
social cause.
• The term "business" also refers to the organized efforts and
activities of individuals to produce and sell goods and services
for profit.
• Business is the activity of making one's living or making money
by producing or buying and selling products (such as goods and
services)

Business Model
• A representation of a firm’s underlying core logic and strategic choices for creating and
capturing value with in value network.
• Amazon – ecommerce
• B2B, B2C, C2C, B2G etc.
• Dell internet based marketers
• Google – search engine
• Southwest airlines low cost carrier
• Franchisee model
• Pure click
• Brick and click
• Freemium, Premium
• Agents , brokers

School of Business
Strategy Formulation
It refers to the development of long term plans for managing
opportunities and threats in the external environment and utilizing
the strength and overcoming the weaknesses within the organization.
A strategist take into consideration components of strategic
management such as vision, mission, core values, external
environment, strategic alternatives and choices, long term objectives,
annual objectives, grand strategy while formulating a strategy.

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ENVIRONMENTAL AND ORGANIZATIONAL ANALYSIS
• Involves monitoring the environment
• Evaluating and disseminating information
• Identify strategic factors that may determine the future of the firm
• Develop common perception, identification of strength and
weaknesses, understanding trends,
• Tools such as survey, focus group, and open forums can be employed
in environment scanning.
• SWOT analysis

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IDENTIFICATION OF STRATEGIC ALTERNATIVES
Strategic alternatives revolve around the question whether to continue or
change the business.
According to Glueck, there are basically four grand strategic
alternatives:
• Stability
• Expansion
• Retrenchment
• Combination

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CHOICE OF STRATEGY
The strategic choice is a decision making process which looks into the
following steps:
• Focusing on strategic alternatives
• Evaluating strategic alternatives
• Considering decision factors – objective factors and subjective factors.
• Finally, making the strategic choice.

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IMPLEMENTATION OF STRATEGY
• The process by which strategies are put into action is called strategy
implantation.
• Program, budgets and procedures are developed for this purpose.
• This process may call for changes in over all culture, organizational
structure and management system.
• The implementation of strategy is typically handled by middle and
lower level managers, except when drastic company wide changes are
needed
• Implementation is reviewed by top management from time to time.

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EVALUATION AND CONTROL
Evaluation and control refer to the processes in which corporate
activities and performance results are compared with the desired
performance.
• Know the weaknesses of strategic plans implemented earlier
• Used to take corrective action and resolve problems
• Provide valuable organizational learning

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Strategic Thinking
• Define Strategic Thinking
• Strategic Thinking Skills
• What makes a decision strategic?

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Define Strategic Thinking
Strategic thinking is a distinctive management activity whose purpose
is “to discover novel, imaginative strategies, which can rewrite the rules
of the competitive game and to envision potential futures significantly
different from present.” Henry Mitzberg

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Strategic Thinking Skills
Know: Observe and seek Trends
Think: Ask the tough questions
Speak: Sound Strategic
Act: Make time for thinking and embrace conflict

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References:
• Strategic Management, Hitt Michael A, Ireland R. Duane, Hoskisson
Robert E., Manikutty S., 9th Edition, Cengage Learning, New Delhi
• https://hbr.org/1996/11/what-is-strategy
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