Key Components of Strategic Management in the Business

Strategic Management
Dr.Lenin.S
Assistant Professor,
Department of Commerce,
Faculty of Science and Humanities,
SRM Institute of Science and Technology
Dr.Lenin.S Assistant Professor, Department of Commerce, Faculty of Science and Humanities, SRM Institute of Science and Technology
Strategic Management 1 / 13

What is Strategic Management?
Strategic management is the process of formulating and implementing
strategies to achieve organizational goals and objectives. It involves
analyzing the internal and external environment, setting strategic
objectives, making strategic decisions, and executing plans to create a
sustainable competitive advantage. Strategic management provides a
framework for aligning an organization’s resources, capabilities, and
actions with its mission and vision.

Key Components of Strategic Management

Environmental Analysis: Assessing the external environment to
identify opportunities, threats, and industry trends that may impact
the organization.

the organization.
Internal Analysis: Evaluating the organization’s strengths,
weaknesses, resources, and capabilities to understand its competitive
advantages and areas for improvement.

the organization.
Strategy Formulation: Developing strategic plans and approaches to
achieve organizational objectives. This includes defining the mission,
setting strategic goals, and identifying strategic alternatives.

the organization.
Strategy Implementation: Executing the chosen strategy by allocating
resources, designing organizational structures, implementing policies
and initiatives, and managing change.

the organization.
Strategy Implementation: Executing the chosen strategy by allocating
resources, designing organizational structures, implementing policies
and initiatives, and managing change.
Evaluation and Control: Monitoring and assessing the effectiveness of
the strategy implementation, identifying deviations from the plan, and
taking corrective actions when necessary.

Benefits of Strategic Management

Enhanced Performance: Strategic management helps organizations
achieve better performance by aligning actions with strategic goals,
improving resource allocation, and fostering adaptability to changing
circumstances.

circumstances.
Competitive Advantage: Through strategic analysis and
decision-making, organizations can identify unique value propositions,
differentiate themselves from competitors, and gain a sustainable
competitive advantage.

circumstances.
Improved Decision Making: Strategic management provides a
structured approach to decision-making, enabling organizations to
make informed choices based on a thorough analysis of internal and
external factors.

circumstances.
Improved Decision Making: Strategic management provides a
structured approach to decision-making, enabling organizations to
make informed choices based on a thorough analysis of internal and
external factors.
Organizational Alignment: Strategic management aligns the efforts of
individuals and teams within an organization, ensuring that everyone
is working towards common goals and objectives.

Purpose of Strategy
The purpose of strategy is to:
Set Direction:
Strategy provides a clear sense of direction and purpose for an
organization. It defines the long-term vision and goals that guide
decision-making and actions.
Create Alignment:
Strategy aligns the efforts of individuals and teams within an
organization, ensuring that everyone is working towards common
objectives. It establishes a shared understanding of priorities and
fosters coordination and collaboration.
Allocate Resources:
Strategy helps allocate resources effectively by identifying priorities and
determining where to allocate time, money, and talent. It ensures that
resources are utilized in a way that maximizes value and supports
strategic objectives.

Purpose of Strategy(Contd.)
4 Gain Competitive Advantage:
Strategy enables organizations to differentiate themselves from
competitors and gain a competitive advantage. It involves identifying
unique value propositions, understanding customer needs, and
positioning the organization to deliver superior products or services.
5 Anticipate and Adapt to Change:
Strategy provides a framework for anticipating and responding to
changes in the external environment. It helps organizations
proactively identify opportunities and threats, adapt to evolving
market conditions, and stay ahead of the competition.
6 Drive Performance and Results:
Strategy drives performance by setting clear objectives, defining key
metrics, and providing a roadmap for achieving desired outcomes. It
enables organizations to measure progress, track performance, and
make adjustments to stay on track.

Levels of Strategy
Corporate Level Strategy
Focuses on the overall direction and scope of the organization
Decisions at the highest level of the organization
Business Unit Level Strategy
Strategies developed for individual business units or divisions
Decisions regarding competitive positioning, market selection, etc.
Functional Level Strategy
Focuses on specific activities and functions within the organization
Strategies developed to support business unit and corporate level
strategies

Types of Strategy
Corporate Strategy
Concerned with the overall scope and direction of the organization
Involves decisions related to diversification, mergers, acquisitions, etc.
Competitive Strategy
Focuses on gaining a competitive advantage in the market
Involves decisions related to pricing, differentiation, target market, etc.
Functional Strategy
Concerned with the activities of specific functional areas within the
organization
Involves decisions related to marketing, operations, finance, etc.
Growth Strategy
Aims to increase the organization’s market share, revenue, and
profitability
Involves decisions related to market expansion, new product
development, etc.
Innovation Strategy
Focuses on fostering creativity and developing new products, services,
or processes
Involves decisions related to research and development, technology
adoption, etc.

Rational Model in Strategic Management
The rational model is a traditional approach to strategic management
that follows a logical and systematic process.
Key steps in the rational model:
1 Environmental Analysis: Assessing the external environment to identify
opportunities and threats.
2 Internal Analysis: Evaluating the internal capabilities and resources of
the organization.
3 Goal Setting: Establishing clear and specific objectives to guide
strategic decision-making.
4 Strategy Formulation: Develop strategies that align with the
organization’s goals and leverage its strengths.
5 Strategy Implementation: Executing the chosen strategies by allocating
resources and implementing action plans.

Rational Model in Strategic Management(contd.)
6 Evaluation and Control: Monitoring and evaluating the outcomes of
strategy implementation and making adjustments as needed.
Conclusion
The rational model assumes that decision-making is a rational,
objective, and logical process.
However, in practice, strategic management often involves
uncertainty, ambiguity, and non-rational factors that may influence
decision-making.

The Emergent approach- Mintzberg’s
Mintzberg’s emergent approach emphasizes the importance of
flexibility and adaptability in organizations.
It suggests that strategies are often formed through a combination of
deliberate planning and unplanned, emergent actions.
This approach recognizes that the unpredictable nature of the
business environment may require organizations to respond and adapt
in real-time.

Key Principles
1 Strategy as a process, not just a plan.
2 Continuous learning and adaptation.
3 Informal networks and decentralized decision-making.
4 Flexibility and improvisation.

Benefits and Challenges
Benefits
Agility in responding to changing market conditions.
More creativity and innovation.
Better alignment with the dynamic business environment.
Challenges
Lack of clear direction and focus.
Potential for chaos and inconsistency.
Difficulty in managing and coordinating emergent activities.

Key Components of Strategic Management in the Business

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