CHAPTER 1 NOTES

STRATEGY AND PROCESS

Strategic Management and Corporate Governance | Easy Exam Notes
This chapter explains the basic foundation of strategic management. It covers the meaning
and development of strategic management, strategy, strategy formulation process,
stakeholders, vision, mission, purpose, business definition, objectives, goals, and the strategic
management model. These notes are written in simple exam style with examples so that the
answer can be remembered and written clearly.

1. Historical Perspective of Strategic Management

Strategic management did not develop suddenly. It evolved gradually as businesses became
larger, competition increased, markets expanded, and managers needed better methods to plan
for the future. Earlier, business decisions were mainly based on owner experience and short-
term planning. Later, organizations started using formal planning, environmental analysis,
competitive analysis, and long-term strategy.

Stages in the Development of Strategic Management

Stage Main Idea Simple Explanation Example
Companies mainly
A shopkeeper plans
Budgeting and Focus on annual controlled income and
monthly expenses and
Financial Control budgets expenditure. Planning
sales targets.
was short-term.
Managers prepared
plans for 3 to 5 years A company plans to
Focus on future
Long-Range Planning using past open five branches in
growth
performance as a the next three years.
guide.
Companies started
studying competitors, A mobile company
Focus on environment customers, technology studies 5G demand
Strategic Planning
and competition and market trends before launching new
before deciding phones.
strategy.

Chapter 1 Notes - Strategy and Process

 Strategy became a A firm launches a new
Focus on formulation, continuous process product, monitors
Strategic Management implementation and involving analysis, sales, studies
control decision, action and competitor response
review. and changes its plan.

Important Points
 Strategic management developed because business environments became more complex.
 Competition forced companies to think beyond daily operations.
 Globalization increased the need for long-term and flexible planning.
 Technology changes made old business methods weak and outdated.
 Modern strategic management gives importance to customers, competitors, resources,
innovation and performance control.

Example
Nokia was once a strong mobile phone company. However, when smartphones and Android
technology became popular, Nokia failed to respond quickly. This shows why strategic
management is important. A company must continuously study environmental changes and
adapt its strategy.

2. Conceptual Framework for Strategic Management

A conceptual framework means the basic structure or outline of a subject. In strategic
management, the framework explains how organizations analyze their environment, frame
strategies, implement them, and evaluate results.

Meaning of Strategic Management

Strategic management is the process of analyzing the internal and external environment,
setting objectives, formulating strategies, implementing strategies, and evaluating
performance to achieve long-term organizational success.

Main Elements of Strategic Management Framework

1. Environmental analysis: Study of internal strengths and weaknesses and external
opportunities and threats.
2. Vision and mission: Deciding the long-term direction and purpose of the organization.
3. Objectives and goals: Setting clear targets to be achieved.
4. Strategy formulation: Selecting the best course of action.
5. Strategy implementation: Putting the selected strategy into action.
6. Strategic evaluation and control: Measuring performance and making corrections.

Chapter 1 Notes - Strategy and Process

Simple Flow of Strategic Management
Environmental Analysis → Vision and Mission → Objectives → Strategy Formulation →
Strategy Implementation → Evaluation and Control

Example
A college wants to become the best management institute in the city. It studies student
expectations, competitor colleges, faculty strength and placement performance. Then it sets a
vision, improves teaching quality, adds skill-based courses, strengthens placement training
and reviews student results. This is strategic management in action.

3. Concept of Strategy
Meaning
Strategy means a long-term plan of action prepared by an organization to achieve its
objectives and gain competitive advantage. Strategy shows how the organization will use its
resources to face competition and succeed in the market.

Definition
Strategy can be defined as a unified, comprehensive and integrated plan designed to achieve
the basic objectives of an organization.

Features of Strategy
 Strategy is long-term in nature.
 It is prepared by top-level management.
 It focuses on organizational objectives.
 It considers internal and external environment.
 It helps in gaining competitive advantage.
 It guides decision-making and resource allocation.
 It is flexible because the business environment keeps changing.

Importance of Strategy
7. Gives clear direction to the organization.
8. Helps managers make better decisions.
9. Improves coordination between departments.
10. Helps in proper use of resources.
11. Helps face competition.
12. Reduces uncertainty and risk.
13. Supports long-term survival and growth.

Chapter 1 Notes - Strategy and Process

Example
D-Mart follows a cost leadership strategy. It keeps operating costs low and offers products at
lower prices. This strategy helps it attract price-sensitive customers and compete strongly with
other retailers.

4. Levels of Strategy
Strategies are prepared at different levels of management. Large organizations usually have
three levels of strategy.
Level Meaning Prepared By Example
Decides overall Expansion,
Corporate Level Top management /
direction of the diversification,
Strategy Board
company merger, retrenchment
Decides how to
Business Level Business unit Cost leadership,
compete in a particular
Strategy managers differentiation, focus
market
Marketing strategy,
Functional Level Decides departmental
Functional managers finance strategy, HR
Strategy plans
strategy

Example
Reliance Industries entering telecom through Jio is a corporate level strategy. Jio offering
low-cost data is a business level strategy. Jio promoting through digital campaigns is a
functional level marketing strategy.

5. Strategy Formation / Strategy Formulation Process

Strategy formulation is the process of choosing the best strategy after studying the internal
and external environment. It answers the question: what should the organization do to achieve
its objectives?

Steps in Strategy Formulation

14. Define vision and mission: The organization first decides its purpose and future direction.
15. Analyze external environment: Opportunities and threats are identified by studying
customers, competitors, economy, technology, laws and society.
16. Analyze internal environment: Strengths and weaknesses are identified by studying
resources, employees, finance, technology and capabilities.

Chapter 1 Notes - Strategy and Process

17. Set objectives and goals: Clear targets are fixed for sales, profit, growth, market share and
performance.
18. Develop strategic alternatives: Different possible strategies are prepared, such as
expansion, diversification, cost leadership or differentiation.
19. Evaluate alternatives: Each strategy is studied based on cost, risk, benefit, feasibility and
company resources.
20. Select the best strategy: Management chooses the most suitable strategy.
21. Prepare supporting plans: Functional plans are made for marketing, finance, HR,
operations and technology.

Example
A restaurant wants to increase sales. It studies customer preferences, competitors, delivery
apps, food cost and staff capacity. It may consider different strategies such as adding online
delivery, opening a new branch, reducing price, or introducing combo meals. After
evaluation, it may choose online delivery and combo offers as the best strategy.

6. Stakeholders in Business
Meaning
Stakeholders are individuals or groups who are affected by the activities of a business or who
can affect the business. A business must consider stakeholder interests while making strategic
decisions.

Types of Stakeholders
Stakeholder Interest in Business Example
Profit, growth and return on Shareholders expect dividends
Owners / Shareholders
investment and share value growth.
Salary, job security, career Workers expect fair wages and
Employees
growth good working conditions.
Customers expect value for
Customers Quality products and fair price
money.
Regular orders and timely Raw material suppliers expect
Suppliers
payment stable business.
Tax payment and legal Government expects
Government
compliance companies to follow laws.
Loan repayment and financial Banks expect interest and
Creditors / Banks
stability repayment on time.
Society / Community Employment, safety and social Local community expects

Chapter 1 Notes - Strategy and Process

 responsibility pollution control and jobs.
Competitors expect ethical
Competitors Fair competition
market practices.

Importance of Stakeholders
 Stakeholders influence business decisions.
 They provide resources and support to the organization.
 Customer satisfaction improves sales and brand loyalty.
 Employee satisfaction improves productivity.
 Government support helps smooth functioning.
 Society approval improves company image.

Example
If a factory ignores local community concerns about pollution, people may protest and the
government may take action. So, while making strategy, the company must consider society,
government, customers and employees, not only profit.

7. Vision, Mission and Purpose

Vision
Vision describes what the organization wants to become in the future. It gives long-term
direction and inspiration.
Example: A college may have a vision to become a leading institution for quality
management education.

Features of Good Vision

 Future-oriented
 Clear and inspiring
 Easy to understand
 Ambitious but realistic
 Provides direction to employees

Mission
Mission explains the present purpose of the organization. It tells why the organization exists,
what it does, whom it serves and how it creates value.
Example: A hospital mission may be to provide affordable and quality healthcare services to
patients.

Chapter 1 Notes - Strategy and Process

Features of Good Mission
 Explains the purpose of the organization
 Identifies customers and services
 Shows values and responsibilities
 Guides daily activities
 Supports strategic decision-making

Purpose
Purpose is the basic reason for the existence of the organization. It is broader than mission and
explains the contribution the organization wants to make.
Example: The purpose of an educational institution is to develop knowledge, skills and
responsible citizens.

Difference Between Vision and Mission

Basis Vision Mission
Future position of the Present purpose of the
Meaning
organization organization
Question Answered What do we want to become? Why do we exist?
Time Focus Future-oriented Present-oriented
Nature Inspirational Practical and action-oriented
To provide quality products at
Example To become a market leader
affordable prices

8. Business Definition
Business definition explains the area in which an organization operates. It answers the
question: What business are we in? A proper business definition helps the company
understand its customers, products, markets and technology.

Importance of Business Definition

 Clarifies the nature of the business.
 Helps identify customers and their needs.
 Guides product and market decisions.
 Prevents the company from becoming narrow-minded.
 Helps in strategy formulation.

Narrow and Broad Business Definition

Type Meaning Example

Chapter 1 Notes - Strategy and Process

 Defines business only by A railway company says it is in
Narrow definition
product the railway business.
Defines business by customer A railway company says it is in
Broad definition
need the transportation business.

Example
If a movie theatre defines itself only as a theatre, it may ignore OTT platforms. But if it
defines itself as being in the entertainment business, it will understand broader competition
and changing customer preferences.

9. Objectives and Goals

Objectives
Objectives are specific results that an organization wants to achieve within a particular time
period. Objectives give direction and help measure performance.

Goals
Goals are broad targets or desired outcomes of the organization. Goals are usually general,
while objectives are more specific and measurable.

Examples
Goal Objective
Increase market share from 10% to 15% within
Increase market share
one year
Reduce customer complaints by 20% in six
Improve customer satisfaction
months
Increase net profit by 12% in the next financial
Increase profit
year
Improve employee performance Train 100 employees by the end of the year

Features of Good Objectives

 Specific: Clearly states what is to be achieved.
 Measurable: Can be measured using numbers or performance indicators.
 Achievable: Realistic and possible with available resources.
 Relevant: Connected to organizational mission and strategy.

Chapter 1 Notes - Strategy and Process

 Time-bound: Has a clear time limit.

Importance of Objectives
22. Provide direction to management and employees.
23. Help in planning and decision-making.
24. Help in performance evaluation.
25. Improve coordination among departments.
26. Motivate employees to work towards targets.
27. Help in effective use of resources.

10. Strategic Management Model

The strategic management model explains the complete process of strategic management. It
shows how an organization moves from analysis to strategy formulation, implementation and
control.

Steps in the Strategic Management Model

28. Define vision, mission and purpose.
29. Analyze external environment to identify opportunities and threats.
30. Analyze internal environment to identify strengths and weaknesses.
31. Set long-term objectives and goals.
32. Formulate suitable strategies.
33. Implement the selected strategies through policies, budgets, structure and leadership.
34. Evaluate performance and control results.
35. Take corrective action wherever required.

Simple Diagram
Vision and Mission → Environmental Analysis → Objectives → Strategy Formulation →
Strategy Implementation → Evaluation and Control → Corrective Action

Example
A smartphone company decides its mission is to provide affordable technology. It studies
customer demand, competitors and internal production capacity. It sets a goal to increase sales
by 20%. It formulates a strategy to launch budget 5G phones, implements it through
production and marketing plans, then evaluates sales performance and customer feedback.

11. Importance of Strategic Management

36. Provides clear direction to the organization.
37. Helps in understanding internal and external environment.
38. Improves decision-making.

Chapter 1 Notes - Strategy and Process

39. Helps in achieving long-term objectives.
40. Supports proper allocation of resources.
41. Improves coordination between departments.
42. Helps face competition effectively.
43. Encourages innovation and change.
44. Reduces uncertainty and risk.
45. Improves organizational performance and survival.

12. Limitations of Strategic Management

46. The future cannot be predicted perfectly.
47. Strategic planning may take more time and cost.
48. Wrong information may lead to wrong strategy.
49. Employees may resist strategic change.
50. Strategies may fail if implementation is weak.
51. External environment may change suddenly.
52. Top management may become overconfident after success.

13. Important Differences

Strategy vs Tactics
Basis Strategy Tactics
Meaning Long-term plan Short-term action plan
Level Top management Middle and lower management
Scope Broad Narrow
Example Entering a new market Offering festival discount

Goals vs Objectives
Basis Goals Objectives
Meaning Broad desired results Specific measurable targets
Nature General Precise
Measurement Difficult to measure Easy to measure
Increase sales by 15% in one
Example Improve sales
year

Chapter 1 Notes - Strategy and Process

Vision vs Mission
Basis Vision Mission
Meaning Future dream Present purpose
What the organization wants to What the organization does
Focus
become now
Time Long-term future Present and near future
To become the most trusted To provide quality service to
Example
brand customers

14. One-Page Exam Answer: Strategy and Process

Strategic management is the process of analyzing the environment, setting objectives,
formulating strategies, implementing them and evaluating performance. It helps an
organization achieve long-term goals and gain competitive advantage. The concept developed
from simple budgeting and long-range planning to modern strategic management because of
increasing competition, globalization, technology and changing customer expectations.
Strategy means a long-term plan of action designed to achieve organizational objectives. A
good strategy gives direction, improves decision-making, helps in resource allocation and
supports competitive advantage. Strategies are prepared at corporate, business and functional
levels. Corporate strategy deals with overall direction, business strategy deals with
competition, and functional strategy deals with departmental plans.
The strategy formulation process begins with defining vision and mission, analyzing the
external and internal environment, setting objectives, developing alternatives, evaluating
alternatives and selecting the best strategy. Stakeholders such as owners, employees,
customers, suppliers, government and society must be considered while making strategic
decisions. Vision explains what the organization wants to become, mission explains why it
exists, and objectives provide measurable targets.
The strategic management model includes vision and mission, environmental analysis,
objectives, strategy formulation, strategy implementation, evaluation and control. Thus,
strategic management helps organizations survive, grow, adapt to change and face
competition effectively.

15. Important 2-Mark Questions and Answers

What is strategy?

Chapter 1 Notes - Strategy and Process

Strategy is a long-term plan of action prepared to achieve organizational objectives and gain
competitive advantage.
What is strategic management?
Strategic management is the process of analyzing environment, formulating strategies,
implementing them and evaluating performance.
What is vision?
Vision is the future position that an organization wants to achieve.
What is mission?
Mission explains the present purpose of the organization and why it exists.
What are objectives?
Objectives are specific and measurable targets that an organization wants to achieve within a
time period.
What are goals?
Goals are broad desired outcomes of an organization.
Who are stakeholders?
Stakeholders are individuals or groups who affect or are affected by business activities.
What is business definition?
Business definition explains the area in which the organization operates and the customer
needs it serves.
Name the levels of strategy.
Corporate level strategy, business level strategy and functional level strategy.
What is strategy formulation?
Strategy formulation is the process of developing and selecting the best strategy for achieving
objectives.

16. Important 10-Mark Questions

53. Explain the historical perspective of strategic management.
54. Explain the concept and importance of strategy.
55. Explain the conceptual framework of strategic management.
56. Explain the strategy formulation process with examples.
57. Explain the role of stakeholders in business.
58. Differentiate between vision, mission and purpose.
59. Explain business definition and its importance.

Chapter 1 Notes - Strategy and Process

60. Explain objectives and goals with examples.
61. Explain the strategic management model.
62. Explain the levels of strategy with suitable examples.

17. Final Conclusion

Chapter 1 gives the foundation of strategic management. It explains how organizations think,
plan and act for long-term success. Strategy gives direction, vision gives future focus, mission
explains purpose, objectives provide measurable targets, and stakeholders influence business
decisions. The strategic management model connects analysis, formulation, implementation
and control. A business that follows this process can adapt to environmental changes, use
resources properly and build a strong competitive position.

Chapter 1 Notes - Strategy and Process