UNIT 1: INTRODUCTION TO STRATEGIC MANAGEMENT
1.1 Meaning of Strategic Management
Strategic Management is the process of formulating, implementing, and evaluating strategies that
help an organization achieve its long-term objectives.
Definitions
It involves analyzing the environment, setting objectives, formulating strategies,
implementing them, and controlling results.
Nature of Strategic Management
1. Future-oriented.
2. Continuous process.
3. Dynamic and flexible.
4. Goal-oriented.
5. Involves all organizational levels.
6. Integrates internal and external environments.
Importance of Strategic Management
Provides direction to the organization.
Helps achieve competitive advantage.
Improves decision-making.
Facilitates adaptation to environmental changes.
Ensures optimum utilization of resources.
1.2 Evolution of Strategic Management
Phase 1: Basic Financial Planning (1950s)
Budget preparation and financial control.
Phase 2: Forecast-Based Planning (1960s)
Long-term forecasting and planning.
Phase 3: Strategic Planning (1970s)
Internal and external environmental analysis.
Phase 4: Strategic Management (1980s onwards)
Strategy formulation, implementation, and evaluation.
Strategic Levels in Organizations
1. Corporate Level
Concerned with overall organization.
Decides business portfolio.
2. Business Level
Concerned with competition in a particular industry.
3. Functional Level
Concerned with departmental strategies.
Phases of Strategic Management
1. Environmental Scanning
2. Strategy Formulation
3. Strategy Implementation
4. Strategy Evaluation and Control
1.3 Strategic Planning
Meaning
Strategic planning is the process of determining organizational goals and deciding how to
achieve them.
McKinsey 7S Model
The seven elements are:
Hard Elements
1. Strategy
2. Structure
3. Systems
Soft Elements
4. Shared Values
5. Skills
6. Staff
7. Style
Diagram
Shared Values
/ | \
Strategy Structure Systems
\ | /
Skills Staff Style
Benefits of Strategic Management
Better performance.
Improved coordination.
Competitive advantage.
Effective resource allocation.
Long-term growth.
Challenges
Environmental uncertainty.
Resistance to change.
High implementation cost.
Lack of information.
Time-consuming process.
UNIT 2: DIFFERENT LEVELS OF STRATEGIES
2.1 Business Level Strategies
Meaning
Strategies used to compete successfully in a specific business market.
Michael Porter's Generic Strategies
1. Cost Leadership
Lowest-cost producer in the industry.
Example: Retail discount stores.
2. Differentiation
Offering unique products/services.
Example: Premium smartphone brands.
3. Focus Strategy
Concentration on a specific market segment.
Types
Cost Focus
Differentiation Focus
Best-Cost Provider Strategy
Combines low cost and differentiation.
Provides superior value at reasonable prices.
Features
High quality.
Competitive pricing.
Better customer satisfaction.
2.2 Functional Level Strategies
Marketing Strategy
Product decisions.
Pricing strategy.
Promotion strategy.
Distribution strategy.
Financial Strategy
Capital structure.
Investment decisions.
Dividend policy.
Risk management.
Operations Strategy
Production planning.
Quality management.
Inventory control.
Process efficiency.
Human Resource Strategy
Recruitment.
Training.
Performance appraisal.
Employee development.
2.3 Research and Development (R&D)
Meaning
Systematic effort to create new products and improve existing products.
Importance
Innovation.
Competitive advantage.
Cost reduction.
Product improvement.
UNIT 3: TECHNIQUES FOR STRATEGIC MANAGEMENT
3.1 Dynamics of Competitive Strategy
Corporate Governance
Corporate governance refers to the system by which companies are directed and controlled.
Objectives
Transparency.
Accountability.
Protection of stakeholders.
Ethical conduct.
Role of Board of Directors
1. Policy formulation.
2. Strategic guidance.
3. Performance monitoring.
4. Risk management.
5. Protecting shareholders' interests.
Role of Top Management
1. Formulating strategy.
2. Allocating resources.
3. Leading implementation.
4. Monitoring performance.
Agency Theory
Concept
Managers (agents) may act in their own interests rather than owners' interests.
Objective
Align management actions with shareholders' goals.
Stewardship Theory
Concept
Managers act as responsible stewards of organizational resources.
Focus
Trust, commitment, and organizational success.
SWOT Analysis
Meaning
A strategic tool used to analyze internal and external environments.
Internal Factors External Factors
Strengths Opportunities
Weaknesses Threats
Strengths
Brand reputation.
Skilled workforce.
Weaknesses
Limited resources.
Poor technology.
Opportunities
New markets.
Growing demand.
Threats
Competition.
Government regulations.
3.2 Strategic Management Process
Strategic Planning
Determining organizational direction.
Strategic Intent
Vision
Future aspirations of the organization.
Mission
Reason for existence.
Objectives
Specific goals to be achieved.
Strategy Formulation Process
1. Environmental analysis.
2. Setting objectives.
3. Developing alternatives.
4. Selecting best strategy.
3.3 Corporate Level Strategies
Meaning
Strategies concerned with the overall scope and direction of an organization.
Strategic Alternatives
Growth Strategy
Expansion through:
Market penetration.
Market development.
Product development.
Diversification.
Stability Strategy
Maintain existing operations without major changes.
Suitable when:
Performance is satisfactory.
Environment is stable.
Expansion Strategy
Increase size and market presence through:
Mergers.
Acquisitions.
Joint ventures.
Strategic alliances.
UNIT 4: ORGANIZATION AND STRATEGIC LEADERSHIP
4.1 Organization Structure
Meaning
Framework defining authority, responsibility, and communication.
Types
1. Functional Structure
2. Divisional Structure
3. Matrix Structure
4. Network Structure
4.2 Strategic Business Unit (SBU)
Meaning
A separate business division with its own objectives and strategies.
Features
Independent planning.
Separate competitors.
Distinct market focus.
Strategic Leadership
Meaning
Ability to influence people to achieve strategic goals.
Characteristics
Visionary thinking.
Decision-making ability.
Risk-taking.
Communication skills.
Strategy-Supportive Culture
Meaning
Organizational culture that supports strategy implementation.
Benefits
Employee commitment.
Better coordination.
Increased productivity.
4.3 Entrepreneurship and Intrapreneurship
Entrepreneurship
Creating and managing a new business.
Characteristics
Innovation.
Risk-taking.
Opportunity recognition.
Intrapreneurship
Entrepreneurial activities within an existing organization.
Benefits
Innovation.
New products.
Competitive advantage.
Strategic Leadership Across Organization
Strategic leaders:
Create vision.
Develop culture.
Manage change.
Motivate employees.
Build competitive advantage.
UNIT 5: STRATEGY IMPLEMENTATION AND CONTROL
5.1 Strategy Implementation
Meaning
Converting strategic plans into action.
Requirements
Resource allocation.
Organizational structure.
Leadership.
Communication.
Strategic Choice
Selection of the best strategy among available alternatives.
Factors Influencing Choice
Resources.
Risk.
Market conditions.
Organizational objectives.
Strategic Control
Meaning
Monitoring strategy execution and performance.
Objectives
Ensure goal achievement.
Identify deviations.
Take corrective action.
Strategy Audit
Meaning
Comprehensive examination of strategic activities.
Purpose
Evaluate effectiveness.
Improve performance.
Identify weaknesses.
5.2 Business Process Re-engineering (BPR)
Meaning
Fundamental redesign of business processes to achieve dramatic improvements.
Objectives
Reduce costs.
Improve quality.
Increase speed.
Enhance customer service.
Steps
1. Identify processes.
2. Analyze current processes.
3. Redesign processes.
4. Implement improvements.
Benchmarking
Meaning
Comparing organizational performance with industry best practices.
Types
1. Internal Benchmarking
2. Competitive Benchmarking
3. Functional Benchmarking
4. Generic Benchmarking
Benefits
Performance improvement.
Learning from best practices.
Better efficiency.
5.3 Six Sigma and Contemporary Practices
Six Sigma
Meaning
Quality improvement methodology aimed at reducing defects.
Goal
3.4 defects per million opportunities.
DMAIC Model
D – Define
Identify problem.
M – Measure
Collect data.
A – Analyze
Determine causes.
I – Improve
Implement solutions.
C – Control
Maintain improvements.
Contemporary Practices in Strategic Management
1. Total Quality Management (TQM)
Continuous quality improvement.
2. Knowledge Management
Effective use of organizational knowledge.
3. Digital Transformation
Use of technology to improve business performance.
4. Business Analytics
Data-driven decision making.
5. Sustainability Strategy
Balancing economic, social, and environmental goals.
IMPORTANT 2-MARK QUESTIONS
1. Define Strategic Management.
2. What is Strategic Planning?
3. Explain McKinsey 7S Model.
4. Define Business-Level Strategy.
5. What is Cost Leadership?
6. Define Differentiation Strategy.
7. What is SWOT Analysis?
8. What is Corporate Governance?
9. Define Strategic Leadership.
10. What is SBU?
11. Define Entrepreneurship.
12. What is Intrapreneurship?
13. What is Strategy Audit?
14. Define Benchmarking.
15. What is Six Sigma?
IMPORTANT 10-MARK QUESTIONS
1. Explain the nature and importance of Strategic Management.
2. Discuss the evolution and phases of Strategic Management.
3. Explain McKinsey 7S Model with diagram.
4. Discuss Michael Porter's Generic Strategies.
5. Explain Functional-Level Strategies.
6. Describe SWOT Analysis and Strategic Management Process.
7. Explain Corporate Governance, Agency Theory, and Stewardship Theory.
8. Discuss Corporate-Level Strategies.
9. Explain Organization Structure and Strategic Leadership.
10. Discuss Strategy Implementation, Strategic Control, and Strategy Audit.
11. Explain Business Process Re-engineering and Benchmarking.
12. Discuss Six Sigma and contemporary strategic management practices.
Quick Memory Formula
Strategic Management Process = EFSI
E – Environmental Scanning
F – Strategy Formulation
S – Strategy Implementation
I – Strategy Evaluation & Control
This four-step model is one of the most frequently asked exam questions.
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