Module 2: Introduction to Strategic Management

Unit 1: Meaning and definition- Characteristics of strategic management - Elements of strategic

management - Strategic intent - Vision, Mission, Goals and Objectives -Preparation of Vision
and Mission

INTRODUCTION
Strategic Management is a way in which strategist set the objectives and proceed about
attaining them. It deals with making and implementing decisions about future direction of an
organization. It helps us to identify the direction in which an organization is moving. It is
applicable to both small as well as large organizations as even the smallest organization face
competition and, by formulating and implementing appropriate strategies, they can attain
sustainable competitive advantage.
Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved, evaluates its competitors and sets goals and
strategies to meet all existing and potential competitors; and then re-evaluates strategies on a
regular basis to determine how it has been implemented and whether it was successful or does
it needs replacement.
Definitions of Strategic Management
In the words Mr. John and Richard, "Strategic Management is defined as a set of decisions and
actions resulting in formation and implementation of strategies designed to achieve the
objectives of an institution".
Alfred Chandler describes strategic management as the "determination of the basic long term
goals and objectives of an enterprise and adoption of course of action and allocation of
resources necessary to carry out these goals."
Glueck defines strategic management as "a stream of decisions and actions which lead to the
development of an effective strategy or strategies help to achieve corporate objectives".
CHARACTERSTICS OF STRATEGIC MANAGEMENT
The following are the important features of strategic management:
1. Process: Strategic management is basically a process consisting of several activities which
are performed in a systematic and sequential manner. The concept of strategic management
must embody all general management principles and practices devoted to strategy formulation
and implementation in the organization.
2. Flexibility: Strategic management has flexibility. This flexibility is required because
strategic management works in the context of environment which is quite dynamics. As a result,
many strategic actions planned may be either left, postponed or changed in the light of
environmental requirements.
3. External Focus: The focus of Strategic management is on relating the organization to its
external environment. It involves determination of an organization’s future position.
4. Open Systems Approach: Strategic management emphasizes that there is continuous
interaction between an organization and its environment. Therefore, the organization must
adapt itself to its ever-changing environment
5. Top Management Function: Strategy formulation and its evaluation is primarily the
responsibility of top management.
6. Iterative Process: Strategic management is not a rigid sequence of steps. Rather it is iterative
because these steps may be performed in any order depending on the situation.
7. Futuristic: Strategic decisions are taken for future and are based on forecasts of future
events. These decisions are made to improve the organization’s future position in the industry
and society.
8. Continuous: Strategic management is an ongoing process of relating effectively the
organization’s objectives and resources to opportunities in the environment.
9. Analytical: Strategic management is a sequential model that details out steps involved in it.
10. Innovation: Strategic management puts emphasis on innovation which is the process of
introducing new things or new ways of working. Innovation is achieved through new strategic
actions which is quite different from the previous actions.

ELEMENTS OF STRATEGIC MANAGEMENT PROCESS

Any process has specified elements. Since strategic management is a process, it has certain
elements, also known as components or phases/stages. Further, each element may have various
activities. These elements and their relevant activities are as follows:
1. Establishing Strategic Intent: Since organizations are deliberate creations, they have some
specific intent, that is, what they will achieve in future and why they will achieve it. In strategic
management, this is known as strategic intent. Strategic intent consists of three major elements
- vision, mission and objectives.
Vision: Vision is the starting point of expressing an organization’s strategic intent. Nations,
organizations and individuals all have a vision. In the context of an organization, vision means
a mental image or articulation of its future.
Mission and Goals: The mission tells clearly why the organization exists and what it would be
doing. Organizations set goals, which they hope to achieve in the medium to long term basis.
Normally organizations work with a hierarchy of goals such as sizeable market share,
maximizing shareholders wealth, profit and so on
Setting of Objectives: Objectives are defined as ends which the organization seeks to achieve.
Objectives may be internal or external Internal objectives are those which define how much is
expected to be achieved with the resources that the organization commands.
2. Environmental Analysis: The second important aspect of the model of strategic
management process is the environmental analysis. Environmental factors- both internal and
external environment-are analyzed to:
• Identify changes in the environment
• Identify the present and future threats and opportunities and
• Assess critically its own strengths and weaknesses.
Organizational environment encompasses all factors both inside and outside the organization
that influence the organization positively and negatively
External analysis: It aims to understand the opportunities and threats in the environment. In
this stage, examination of three environments normally take place. the Industry Environment
in which the organization operates, the National and the Macro Environment forces such as
social, economical, governmental and legal, International and technological factors, which
affects the organization. The competitive structure of the industry, competing firms and
competitive position are analyzed during this phase.
Internal Analysis: Identifying strengths and weakness of the organization involves
identification of quantity and quality of resources and distinctive competencies that help in
building competitive advantage to achieve superior efficiency, quality, innovation and customer
loyalty.
3. Identification of Strategic Alternatives: Interaction of organization with its environment
in the light of its strengths and weaknesses will result in various strategic alternatives. However,
all alternatives cannot be chosen even if all of them produce the same results. Therefore, the
strategic alternatives should be identified in the light of strategic opportunities and threats
generated through environmental analysis, organizational analysis, and organizational strategic
intent.
4. Choice of Strategy: The identification of various strategic alternatives leads to the level
where managers can consider some alternatives seriously and may choose one of the most
acceptable. This is the stage of strategic decision process and all factors relevant for decision
making are relevant here. Since the particular strategy attempts to affect the organizational
operation in some predetermined manner, the choice process systematically considers how each
alternative strategy affects the various critical factors of the organizational functioning. Further,
the chosen alternative should be acceptable in the light of organizational objectives.
5. Strategy Implementation: The fifth step of strategic management process is the
implementation of strategy. The logically developed strategy is to be put into action. The
organization cannot reap the benefits of strategic management, unless the strategy is effectively
implemented. In strategy implementation, various activities involved are design of organization
structure to suit the chosen strategy, effective leadership, development of functional policies,
development and allocation of resources, development of effective information system, etc.
6. Strategic Control: Strategic control (also called as strategy evaluation and control) may be
treated as the last stage of strategic management process. However, this is an ongoing process
and strategic evaluation and control should be taken as the process for future course of action.
For effective implementation and, consequently, achievement of organizational objectives, it is
necessary that there is continuous monitoring of the implementation of the strategy so that
suitable action is taken whenever something goes wrong.
7 Feedback: Strategic Management is an ongoing process. Periodic feedback reveals whether
objectives are attainable or implementation is poor or not. The feedback is fed into the next
round of strategic formulation and implementation. It may reaffirm objectives or suggest
changes in goals and objectives
STRATEGIC INTENT
Strategic intent is the starting point of Strategic Management Process. Strategic Intent implies
a particular view about long-term market or competitive position that an organization hopes to
achieve in future. It should be a vision of the future conveying a unifying sense of direction.
Hierarchy of Strategic Intent
Strategic Intent has hierarchy ranging from long-term generalized intent to short-term specific
intent. It lays down the foundation for the strategic management of any organization. The
strategic intent makes clear what an organization stands for. Strategic intent of an organization
is established in the form of a hierarchy consisting of vision, mission, business definition, goals
and objectives.
VISION
Vision is the starting point of expressing an organization’s strategic intent Nations,
organizations and individuals all have a vision. For example, a nation like India may have the
vision to become a developed country by 2025. Similarly an MBA student may have the vision
of retiring as the chief executive of a large diversified multinational corporation
In the context of an organization, vision means a mental image or articulation of its future.
Vision represents top management's aspirations about the company's direction and focus. Every
organization needs to have a vision of the future. A clearly articulated vision molds
organizational identity, stimulates managers in a positive way and prepares the company for
the future.
Definition of Vision
According to Kotter, vision is a "description of something (an organization, a business, a
technology, an activity) in the future". It gives direction of where the company wants to go.
Richard Lynch defines vision as "a challenging and imaginative picture of the future role and
objectives of an organization, significantly going beyond its environment and competitive
position".
Examples of Vision Statement
1. Amazon: "To be Earth's most customer-centric company where customers can find and
discover anything they might want to buy online."
2. Google: "To provide access to the world's information in one click."
3. Intel: "If it's smart and connected, it's best with Intel."
4. LinkedIn: "Create economic opportunity for every member of the global workforce.”
ELEMENTS / ESSENTIALS/CHARACTERISTICS OF A SOUND VISION
A good vision should possess the following characteristics:
1. Realistic: A vision must be based on reality to be for an organization. It not be merely day
dreaming but a dream to be converted into reality,
2. Credible: A vision must be believable to be relevant to members organization concerned. If
the members of the organization don't find the realistic, it will not be significant or serve a
useful purpose.
3. Attractive: A vision must be attractive so as to inspire and organization's members.
4. Future: A vision is not for the present, it is for the future. Simply, a not where an organization
is now but where it will be in future.
5. Unique: A good vision reflects uniqueness and distinctive compete organization.
6. Appropriate: A good is consistent with the core values and b environment of the
organization.
7. Motivational: A good vision should inspire members of the orgasm encourage commitment
from them.
8. Articulated: A good vision is well articulated and well understood who are responsible to
convert it into
MISSION
A mission statement is an enduring statement of purpose. A clear mission statement is essential
for effectively establishing objectives and formulating strategies. It describes the reason for the
existence of an organization. Every organization exists to satisfy some needs of the society.
Mission is a statement which defines the role that an organization plays in the society. For
example, a publisher exits to satisfy the information needs of the society.
According to John A Pearce II, "A mission statement implies the fundamental and enduring
objectives of an organization that set it apart from other organizations of similar nature. A
mission statement identifies the scope of a firm's operations in product and market terms".
According to Thomson Arthur, "mission is the purpose for which or reason why, an
organization exist"
Examples Of Mission Statement
1 Amazon : “We strive to offer our customers the lowest possible prices, the best
available selection, and the utmost convenience.”
2 Google : “ To organize the world's information and make it universally accessible
and useful. ”
3 Intel: “To shape the future of technology to help create a better future for the entire
world”
4 LinkedIn : “Connect the world's professionals to make them more productive and
successful”
CHARACTERISTICS / ESSENTIALS OF A GOOD MISSION STATEMENT
In order to be effective, a good a mission statement should posses the follow characteristics:
1 Realistic and achievable: A mission statement should be realistic achievable. Impossible
statements do not motivate people. Aims should developed in such a way so that may become
feasible
2. It should neither be too broad nor be too narrow: If it is broad, it will become meaningless.
A narrower mission statement restricts the activities of organization. The mission statement
should be precise.
3. Clarity: A mission statement should not be ambiguous. It must be clear for action. Highly
philosophical statements do not give clarity.
4. Distinctive: A mission statement should be distinct. If it is not distinct, it will not have any
impact. Copied mission statements do not create any impression.
5. Societal linkage: It should have societal linkage. Linking the organization to society will
build long term perspective in a better way.
6. It should not be static: To cope up with ever changing environment, dynamic aspects be
looked into.
7. Motivation: It should be motivating for members of the organization and of society. The
employees of the organization may enthuse themselves with mission statement.
8. Action plan: The mission statement should indicate the process of accomplishing objectives.
The clues to achieve the mission will be guiding force.
9. Unique: An organizations’ mission statement should establish the individuality and
uniqueness of the company.
10. Customer orientation: A good mission statement identifies the utility of a firm's products
or services to its customers and attracts customers to the firm.
BUSINESS DEFINITION
A business definition means a clear statement of the business or businesses of the organization
engages at present or wishes to pursue in future. A company's business is defined by what needs
it is trying to satisfy, to which consumer group it is targeting and the technologies it will use
and the functions it will perform in serving the target market.
Defining the business answers the question: What business are we in? The business definition
of HMT is "We are watch makers to the nation". The business definition of TELCO is "We are
in the transportation business". These statements define the business of the firm. An
organization obviously needs to define its business in a broad way covering three vital aspects:
a) The product/service offering
b) Customer segment
c) Value creation.
Business may be defined at corporate level or SBU level. In case of a single business company
such as Hero Motor Corp, business definition is simple. But a large conglomerate such as ITC
Limited has to define its business at both corporate and SBU levels.
GOALS AND OBJECTIVES
Once the vision and mission statements are written, the organization starts focusing on its goals
and objectives. Both goals and objectives refer to the ultimate end results which are to be
accomplished by the overall plan over a specified period of time.
ORGANIZATIONAL GOALS
Goals are attempted to make mission statement more concrete. A goal is a specific target that a
firm intends to reach in the long run. A goal describes clearly the activities and task to be
completed by an individual, a department or an organization. Goals thus provide the basis for
measuring the company's performance and the progress it is making towards its vision.
ORGANIZATIONAL OBJECTIVES
Goals are mainly generalized and qualitative whereas objectives are more specific and
quantitative. Organizations must specify what they hope to achieve in the future by formulating
a set of objectives. Objectives are quantitative in nature. For e.g. a simple statement of
"increased profitability" is a goal, not an objective. because it does not state how much profit
the firm wants to make. Objectives are the end results of planned activity. They state what is to
be accomplished by when and should be quantified. For example, "increase the profits by 10%
over last year" is an objective. All objectives should contain:

➤ An attribute which can be measured.

➤ A scale on which that can be measured.

➢ A level to be achieved.

➤ A time scale for the achievement of the target.

Difference between Vision and Mission

Vision Mission
Vision focuses on long term concept and high The focus of mission is on what the
achievement level for the organization organization proposes to do for its
stakeholders
A dream The purpose or reason for a firm’s existence
Broad More specific than vision
Answer the question “ What we want to Answers the question “what is our business”
become?”

Difference between Goals and Objectives

Goals Objectives
General Specific
Qualitative Quantitative measurable
Borad organization -wide target Narrow targets by operating divisions
Long term results Immediate , short tern results