Introduction to Strategic

Management

UNIT 1
BBA VIII THE SEMESTER (TU)
Concept of Strategic Management
 Strategic decision is selecting the best strategy among various strategies. It is a
process of evaluating strategic alternatives and making a choice that best aids
the achievement of organizational objectives. These are long-term decisions
aimed at sustained competitive advantage.

 Strategic management is the process of creating, implementing, and evaluating

cross-functional decisions to align an organization's long-term goals with its
resources. It involves analyzing internal and external factors, formulating
strategies, and allocating resources to achieve sustainable competitive
advantages and organizational objectives.
 “Strategic Management is a set of managerial decisions and actions
that determine the long run performance of an organization.”
Wheelen and Hunger

 “Strategic management includes understanding the strategic position

of an organization, strategic choices for the future and turning strategy
into actions.”
Johnson and Scholes

 “The strategic management process is the full set of commitments,

decisions and actions required for a firm to achieve strategic
competitiveness and earn above-average returns.”
Hitt, Ireland and Hoskisson
 Importance of Strategic
Management
Deals with
Builds Delivers Exploits core
Opportunity
Synergy Value Competence
and Threats

Importance of
Strategic Competitive
Fit
Strategic Capability
Management

Organizational Resource Organizational Manages

Unity Management Effectiveness Change
1. Builds synergy: When organizational parts interact to produce a joint effect that
is greater than the sum of the parts acting alone, synergy occurs.
2. Delivers value: Delivering value to the customer is at the heart of strategic
management. Value is the combination of benefits received and costs paid.
Strategic management always focuses on competitive advantage through a
superior customer value.
3. Exploits core competency: A core competency is the activity or process of an
organization that serves as the source of competitive advantage.
4. Deals with opportunity and threats: An opportunity is a major favourable
condition in the firm’s environment. Strategic management enables an
organization to grab the opportunities or protect from threats that arise from the
external environment.
5. Strategic fit: Strategic fit is concerned with matching the strategies to the internal
capabilities of the organization and the opportunities in the external
environment. It examines the resource base of the organization and explores
how they can be utilized to achieve maximum benefits. An effective strategic
management ensures strategic fit.
6. Competitive capability: Competitive capability is a firm’s ability to integrate,
build, and reconfigure internal and external competences to address rapidly
changing environment.
 7. Organizational unity: It is a powerful component to drive an organization in
a clear way and presents a form of unity where all the employees share the
same vision and mission.
 8. Resource management: The process of acquiring, allocating and utilizing
resources for building up organizational capability is called resource
management. Strategic management facilitates resource management
effectively.
 9. Organizational effectiveness: The efficiency with which an organization is
able to meet its objectives is called organizational effectiveness. Strategic
management enhances organizational effectiveness with the support and
commitment of the stakeholders mostly employees.
 10. Manages change: The business environment has become an ever
changing phenomenon. Strategic management prepares an organization to
accept and manage the changes to take place within and outside the
organization.
 Elements of Strategic Management
 Each phase of the strategic management process consists of a number of elements, which
are discrete and identifiable activities performed in logical and sequential steps.
 Strategic management process consists of strategy formulation, strategy implementation
and strategic evaluation. Each of these elements has sub-elements. They are as follows:
 1. Strategic Analysis

Strategic analysis is concerned with understanding the strategic position of

the organisation.
 The aim of strategic analysis is, then, to form a view of the key influences on
the present and future well-being of the organisation and therefore on the
choi
 (a) The environment

The organisation exists in the context of a complex commercial, economic,

political, technological, cultural, and social world.
 This environment changes and is more complex for some organisations than
for others. Since strategy is concerned with the position a business takes in
relation to its environment, an understanding of the environment’s effects on
a business is of central importance to strategic analysis.
 (b) The resources of the organisation

Just as there are outside influences on the firm and its choice of strategies, so
there are internal influences. One way of thinking about the strategic
capability of an organisation is to consider its strengths and weaknesses.
 These strengths and weaknesses may be identified by considering the resource
areas of a business such as its physical plant, its management, its financial
structure, and its products.
 (c) The expectations of different stakeholders

The expectations are important because they will affect what will be seen as
acceptable in terms of the strategies advanced by management. However,
the beliefs and assumptions that make up the culture of an organisation,
though less explicit, will also have an important influence.
Concept of Strategy
 Strategy is a means to achieve long-term objectives. It is a potential
plan of actions that includes top management decisions and a
significant amount of resources. It is likely to be concerned with the
long-term direction of an organization.
 According to Jauch and Glueck
A strategy is a unified, comprehensive and integrated plan that
relates the strategic advantages of the firm to the challenges of
environment.
 ■ According to Johnson and Scholes
Strategy is the direction and scope of an organization over the long
term, which achieves advantage for the organization.
 ■ According to Fred David
Strategies are the means by which long term objectives will be
achieved.
Characteristics of Strategy

 Long-term
 Comprehensive action plan
 Competitive advantage
 Stakeholders’ expectation
 Strategic fit
 Based on strategic decisions
 A means only
Levels of Strategy
 A multi-business organization prepares strategy in three levels:
 Corporate Level Strategy
 Business Level Strategy
 Functional Level Strategy
 1. Corporate Level Strategy

Corporate level strategy is the uppermost level of strategy. It is
derived from the vision and mission statement. It is related to the
choice of direction for a firm as a whole. It addresses the
question: What business are we in?
 Types of Corporate Level Strategy
 Stability strategy
 The strategy that aims to continue the current operations of an
organization without any significant change in direction.
 Expansion/Growth strategy
 The strategy which is designed to achieve growth in sales, assets,
profits or some combinations.
 Retrenchment strategy
 Strategy which aims to reduce the size or diversity of a company for
financial feasibility.
 Combination/Mixed strategy
 If an organization adopts stability, expansion and retrenchment
strategies in different business units, it is said to follow combination
strategy.
 2. Business Level Strategy
Business level strategy is related to competing successfully in an individual
product market. It directs a strategic business unit (SBU) towards competitive
advantage in the market. A business level strategy follows the corporate
strategy.
 Business level strategy deals with the question: How do we compete?
 Types of Business Level Strategy
 Cost leadership strategy
 It attempts to achieve competitive advantage by providing acceptable
products at cost lower than the competitors.
 Differentiation strategy
 It involves providing goods or services which are different than those of
competitors at acceptable cost.
 Focus strategy
 It aims to serve a particular buyer group or niche more effectively than the
competitors.
 Focus Low Cost
 Focus Differentiation
 3. Functional Level Strategies
The strategies which aim at bringing effectiveness in different functions of a
business are called functional strategies. They deal with the question: How
do we support the business-level strategy?
 Types of Functional Level Strategy
 Marketing strategy: It deals with pricing, selling and distributing a product.
 Production/Operations strategy: It determines how and where a product or
service is to be manufactured.
 Finance strategy: It includes activities related to acquisition and
management of fund required for the business.
 Human resource strategy: It deals with acquisition, development and
facilities of human resource.
 Research and development strategy: They are vital for innovation and
development of product and process.
 Need for Strategy
 1. Provides Direction and Purpose
 A strategy serves as a roadmap. It defines what the organization wants to achieve
(goals) and how it plans to reach those goals. Without a strategy, decisions become
inconsistent and reactive.
 2. Helps in Dealing with Environmental Uncertainty
 Business environments keep changing due to technology, customer preferences,
economic shifts, and competition. A strategy helps organizations anticipate change and
prepare for the future instead of reacting after the change happens.
 3. Facilitates Better Resource Allocation
 Resources such as money, manpower, and time are limited. Strategy ensures these
resources are allocated to areas that create the most value and strengthen competitive
advantage.
 4. Improves Coordination Across Departments
 A clear strategy aligns different departments (finance, HR, marketing, operations) toward
common goals. This reduces conflict, duplication of work, and confusion.
 5. Enhances Competitive Advantage
 Organizations need to differentiate themselves from competitors. A good strategy
helps identify strengths and opportunities to create unique value in the market.
 6. Ensures Long-Term Survival and Growth
 Strategy focuses on sustainability and not just short-term profits. It helps organizations
identify future opportunities, invest in innovation, and avoid risks that could threaten
survival.
 7. Supports Better Decision-Making
 Strategy acts as a guideline for managers. It makes decisions more consistent,
logical, and aligned with long-term objectives.
 8. Encourages Proactive, Not Reactive, Management
 Instead of waiting for problems to arise, strategy encourages forward-thinking.
Organizations can take actions in advance to shape their future rather than be
shaped by external forces.
 9. Builds Stakeholder Confidence
 Investors, employees, customers, and partners trust organizations that have a clear
strategic direction. It builds credibility and creates long-term relationships.

Strategic Planning

 Strategic plan is a long-run plan of an organization. It determines

where an organization is going over the time to come, how it is
going to get there, and how it will know if it got there or not.
 Characteristics of Strategic Plan
 Long-term
 Based on environmental analysis
 Strategic fit
 Involvement of top management
 Set of priority
 A means only
Steps of Strategic Planning
1. Define vision and mission
2. Environmental analysis: Internal and external environmental
analysis
3. Determination of long-term goal
4. Strategy formulation
 Components of Strategic Planning
 Strategic Vision
 Mission
 Objectives
 Strategy
Concept of Strategic Vision
 Vision is the picture of the desired future state of an organization. It
specifies the direction that a company intends to follow in
developing and strengthening its business.
 Characteristics/Qualities of Strategic Vision
 Future focused
 Directional
 Clear
 Feasible
 Values-based
 Challenging
 Unique
 Inspiring
Benefits of Strategic Vision

 Provides direction
 Guides organizational decisions
 Shapes strategy
 Sets priority
 Aligns people and activities
 Reflects core values and belief
 Empowers employees
 Brings change
 Concept of Mission
 A mission statement defines the business in terms of customers,
employees, suppliers, and the community. It helps clarify the scope and
objectives of the business. It also reflects the business’s special niche.
 Characteristics of Mission
 Broad in scope
 Precise
 Inspiring
 Multi components
 Distinctive
 Components of strategy
Importance of Mission

 Brings uniformity
 Base of resource allocation
 Develops organizational culture
 Enhances employee ownership
 Defines the business
 Reflects the organizational responsibility
 Shows the operating philosophy
 Objectives
 Objective
 Objectives are the expected outcomes of an organization. They convert the
strategic vision into specific performance targets. They are the end result of
planned activity.
 Components of Objective
 Specific
 Measurable
 Achievable
 Realistic
 Timely
 Motivating
 Flexible
 Hierarchical
 Congruent across departments
 Levels of Objective
 Corporate Level Objective
 Business Level Objective
 Functional Level Objective
 Individual Level Objective
 Role of Objective in Strategic Management
 Define the relationship of the organization with the environment
 Show the relevancy of vision and mission
 Provide the base of strategic decision
 Provide foundations for the development of work standard
 Help develop distinctiveness and existence
Process of Strategic Management

 Strategic Management refers to the process of formulating, implementing,

and evaluating strategies to achieve organizational goals effectively.
 It involves three major components:
 Strategic Planning (Strategy Formulation)
 Strategic Implementation
 Strategic Evaluation and Control
 1. Strategic Planning (Strategy Formulation)
 Strategic planning is the first stage of strategic management. It deals with
setting the direction and deciding what the organization wants to achieve in
the long term.
 Key Elements of Strategic Planning:
 a. Determination of Vision, Mission, and Objectives
 Vision:
The long-term dream or big picture of what the organization wants to
become.
 Mission:
A general statement of how the organization will achieve its vision. Describes
its purpose and role in society.
 Objectives:
Specific results to be achieved within a given time frame. Objectives must be
SMART (Specific, Measurable, Achievable, Realistic, Time-bound).
 b. External Environment Analysis
 External forces beyond the control of management.
 Includes: economic, socio-cultural, political-legal, technological, and global
factors.
 Helps identify opportunities and threats.
 Necessary for forecasting how changes in the environment affect strategy.
 c. Internal Environment Analysis
 Internal forces within the organization.
 Includes: structure, resources, policies, culture, objectives.
 Helps identify strengths and weaknesses.
 Essential for matching internal strengths with external opportunities.
 d. Industry and Competitive Analysis
 Helps managers understand the market position of the industry.
 Useful for deciding whether entering a market is practical.
 Helps analyze competitors’ strengths and weaknesses.
 Supports strategic decisions to gain competitive advantage.
 e. Identifying and Selecting Strategy
 The organization identifies various strategic alternatives and selects the best one.
 Types of strategies:
 Corporate-level strategy – overall direction of the organization.
 Business-level strategy – how each business unit competes in its market.
 Functional-level strategy – improving functional areas (marketing, HR, finance).
 Selection of strategy is based on:
 Suitability – fit with environment and capabilities. Is this strategy appropriate for our
situation?
 Acceptability – returns, risks, stakeholder expectations. Will this strategy be
welcomed by our stakeholders?
 Feasibility – resources and ability to implement. Can we realistically implement this
strategy?
 2. Strategic Implementation
 Strategic implementation is the action phase where plans are executed.
 It involves:
 Setting annual objectives
 Formulating policies
 Allocating resources
 Providing instructions and leadership
 Coordinating organizational activities
 Three major components:
 a. Organizational Structure
 Formal arrangement of jobs, authority, responsibility, and reporting
relationships.
 Involves division of work, hierarchy, span of control, delegation, rules, and
procedures.
 Ensures smooth and systematic strategy execution.
 b. Resource Planning
 Ensures availability and proper allocation of resources:
human resources, capital, machinery, materials, information, technology
 Helps the organization respond to environmental changes.
 Supports capturing business opportunities.
 c. Management System
 Guides all organizational activities.
 Includes communication, teamwork, supervision, motivation, and
coordination.
 Managers must provide proper instructions, evaluate performance, and
maintain control.
 Leadership quality is crucial for success.
 3. Strategic Evaluation and Control
 Strategic evaluation and control ensures that the strategy is working effectively.
 Key purposes:
 Measure performance
 Identify deviations
 Take corrective actions
 Provide feedback for future strategies
 Main activities:
 Checking whether deadlines are met
 Evaluating if processes are working properly
 Identifying whether expected results have been achieved
 Importance:
 Ensures commitment and accountability
 Keeps organizational activities on the right track
 Helps managers and employees accomplish tasks efficiently
 Evolution of Strategic Management
 The concept of strategic management has evolved through several stages, reflecting
the changing complexity of business environments and organizational needs. Initially,
businesses were primarily concerned with short-term financial control, but over time, the
focus shifted toward long-term growth, adaptability, and competitiveness.
 1. Budgetary Planning (1950s)
 2. Long-range Planning (1960s)
 3. Strategic Planning (1970s)
 4. Strategic Management (1980s onwards)
 5. Modern Approach (1990s–Present)
 1. Budgetary Planning (1950s)
 During the 1950s, organizations operated in relatively stable and predictable
environments. The main managerial concern was maintaining internal efficiency
and financial control.
 Planning was limited to annual budgets, focusing on cost control, profit
maximization, and resource allocation.

Key Features: Limitations:

1. Emphasis on financial planning and short-term Failed to anticipate long-term challenges and
goals. opportunities.
2. Management by objectives within a fiscal Ignored external environmental factors like market
year. trends or competition.
3. Control-oriented approach; little focus on Led to narrow financial perspectives without
environmental changes. strategic direction.
4. Decision-making was largely reactive rather
than proactive.
 2. Long-range Planning (1960s)
 As markets expanded and competition increased in the 1960s, organizations realized that
short-term budgeting was not sufficient.
 Long-range planning emerged, emphasizing forecasting and projecting future conditions
based on existing trends.

Key Features: Limitations:

1. Planning horizons extended to 5–10 years. 1. Assumed environmental stability and
2. Based on the assumption that the future predictability.
would resemble the past. 2. Did not consider sudden technological or
3. Heavy reliance on quantitative forecasting political changes.
techniques. 3. Focused more on growth forecasts than
4. Aimed at preparing for expected growth strategic adaptability.
and expansion.
 3. Strategic Planning (1970s)
 By the 1970s, the business environment became more complex due to oil crises, global
competition, and technological innovation.
 Long-range planning proved inadequate in dealing with uncertainty. As a result, strategic
planning evolved as a more comprehensive process.

Key Features: Objectives:

1. Focus on aligning internal strengths 1. To analyze the organization’s competitive position.
with external opportunities (SWOT 2. To choose the best possible strategic alternatives.
Analysis). 3. To ensure long-term survival and success.
2. Consideration of competitors,
market forces, and environmental Limitations:
factors. 1. Overemphasis on planning documents rather than
3. Introduction of portfolio models implementation.
(e.g., BCG Matrix, GE Model). 2. Rigid and formalized process with limited
4. Development of alternative adaptability.
strategies for different 3. Often top-management driven, excluding middle-
environmental scenarios. level involvement.
 4. Strategic Management (1980s
onwards)
 In the 1980s, global markets became more volatile due to deregulation, technological
disruption, and globalization.
 Organizations needed a more flexible and dynamic approach, leading to the
development of Strategic Management as a broader concept than strategic planning.

Key Features: Strategic Management Process Includes:

1. Integration of strategy formulation, 1. Environmental Scanning
implementation, and evaluation. 2. Strategy Formulation
2. Continuous monitoring of internal and 3. Strategy Implementation
external environments. 4. Strategy Evaluation and Control
3. Emphasis on leadership, culture, and Benefits:
organizational learning. 1. Encourages proactive decision-making.
4. Focus on achieving and sustaining 2. Enhances organizational flexibility and
competitive advantage. innovation.
5. Greater participation from all levels of 3. Promotes coordination among functional areas.
management. 4. Ensures adaptability to environmental changes.
 5. Modern Approach (1990s–Present)
 The modern era of strategic management focuses on innovation, agility, and dynamic
capabilities.
 Rapid globalization, digital transformation, and technological disruptions have made
flexibility essential. Companies now adopt strategic thinking that emphasizes creativity,
speed, and resilience.
Key Features: Examples:
1. Continuous strategic renewal and Tech firms like Google or Apple
innovation. continuously evolve strategies through
2. Integration of sustainability and corporate innovation.
social responsibility (CSR). Businesses use AI and analytics for real-time
3. Data-driven and technology-enabled strategic decisions.
decision-making.
4. Emphasis on knowledge management,
learning organizations, and digital strategy.
5. Strategic alliances and networks for
competitive advantage.
Elements of Strategic Management
 Strategic management is a comprehensive and continuous process that helps an
organization analyze its environment, formulate strategies, implement them
effectively, and evaluate the results for future improvement.
 The process is cyclical, meaning that the outcome of one stage influences the
beginning of the next.
 The four core elements of strategic management are:
 Environmental Scanning
 Strategy Formulation
 Strategy Implementation
 Strategy Evaluation and Control
 1. Environmental Scanning
 Environmental scanning is the process of analyzing both the internal and external environments of an organization to identify
opportunities, threats, strengths, and weaknesses. It provides the information base for strategic decision-making.
 Purpose:
 To identify trends and changes that may affect the organization’s future.
 To assess how internal capabilities align with external conditions.
 To prepare for possible opportunities and threats.
 Types of Environment:
 a. External Environment
This refers to forces outside the organization that influence its performance and strategy.
 Macro Environment (PESTEL Analysis): Political, Economic, Social, Technological, Environmental, and Legal factors.
 Micro Environment (Industry/Competitive Environment): Competitors, customers, suppliers, intermediaries, and industry structure.
 b. Internal Environment
It includes resources, capabilities, and core competencies within the organization such as:
 Human resources
 Organizational structure and culture
 Financial position
 Technology and innovation capacity
 Techniques Used:
 SWOT Analysis: Identifying Strengths, Weaknesses, Opportunities, and Threats.
 Value Chain Analysis (Porter): Examines internal activities to identify sources of competitive advantage.
 Benchmarking: Comparing performance with best industry practices.
 2. Strategy Formulation
 Strategy formulation is the process of developing long-term plans and courses of action
that will enable an organization to achieve its mission, vision, and objectives. It determines
what needs to be done to reach desired goals.
 Purpose:
 To establish clear direction and competitive positioning.
 To decide how to utilize resources effectively.
 To prepare responses to environmental challenges.
 Steps in Strategy Formulation:
 Defining Vision, Mission, and Objectives – Establishing what the organization stands for and
where it wants to go.
 Environmental Analysis – Using information from scanning to identify strategic issues.
 Generating Strategic Alternatives – Developing possible options (e.g., cost leadership,
differentiation, diversification).
 Evaluating Alternatives – Comparing options based on feasibility, suitability, and
acceptability.
 Selecting the Best Strategy – Choosing the most appropriate strategy that aligns with goals
and resources.
 3. Strategy Implementation
 Strategy implementation is the process of translating formulated strategies into concrete actions and results. It focuses on how to make the
strategy work effectively.
 Purpose:
 To put strategic plans into operation.
 To ensure coordination across departments.
 To align resources, people, and processes toward strategic objectives.
 Key Components of Implementation:
 Organizational Structure:
 The structure should support the strategy.
 Example: A company pursuing innovation should have a flexible, decentralized structure.
 Leadership and Management:
 Effective leadership motivates employees and manages change.
 Leaders play a vital role in communication, resource allocation, and conflict resolution.
 Organizational Culture:
 Culture shapes behavior, commitment, and teamwork.
 A strategy of quality improvement requires a culture of excellence and accountability.

 Resource Allocation:
 Allocating human, financial, and technological resources appropriately.
 Policies and Procedures:
 Establishing guidelines that direct daily decisions consistent with strategy.
 Change Management:
 Managing resistance and preparing employees for new systems or processes.
 4. Strategy Evaluation and Control
 Meaning:
Strategy evaluation and control involve measuring the effectiveness of implemented strategies
and making necessary adjustments to ensure that organizational goals are achieved.
 Purpose:
 To monitor progress and performance.
 To detect deviations from planned objectives.
 To take corrective actions in time.
 Steps in Evaluation:
 Setting Performance Standards:
 Define clear benchmarks for financial and non-financial performance (e.g., ROI, market share,
customer satisfaction).
 Measuring Actual Performance:
 Collect data on outcomes and progress toward goals.
 Comparing Results with Standards:
 Identify gaps between actual and expected performance.
 Taking Corrective Actions:
 Modify strategies, processes, or objectives to address deviations.
 Elements of S.M
Element Focus Area Key Output

Environmental Scanning Identifying strengths, Information for strategy

weaknesses, opportunities, formulation
and threats

Strategy Formulation Designing long-term action Strategic plan and objectives

plans
Strategy Implementation Executing the chosen Operational performance
strategies and goal achievement

Strategy Evaluation Reviewing and controlling Corrective actions and

outcomes continuous improvement