Strategic Management: Some definitions
Every discipline has its own jargons and specialized terminology. Strategic management has its quota of
terms and jargons. Some of these you will learn later in this course. But here let us clarify some of the
basic terms that you will encounter frequently in business literature. We have already given one
definition of strategy in ‘Defining a Business’. Here we will cover some concepts and definitions.
Strategy:
“Strategy is the determination of the basic long-term goals and objectives of an enterprise and the
adoption of the courses of action and the allocation of resources necessary for carrying out these goals.”
(Alfred D. Chandler, Jr., 1962, ‘Strategy and Structure’, MIT Press, Boston, MA).
Mission:
The mission of an organization states how it intends to serve its stakeholders. It describes why the
organization exists, what is its purpose, and provides a framework for achieving its objectives.
Vision:
The vision of an organization is intended to be futuristic. Since strategy itself is long-term in nature,
vision has got to be truly far reaching. It captures the dreams and aspirations of the organization, its
founders and members.
Objectives:
We will use the terms goals and objectives interchangeably, but some textbooks make a distinction
between the two. It is, however, not important. A strategy has some objectives. Those objectives
translate strategies into actionable pieces that can be given targets which together help achieve the
overall goals.
Levels of strategy:
Most companies will have multiple levels of strategy. In this course we will be mostly concerned with
business level strategy. A company such as Tata Steel that operates in a single business will have a
business level strategy.
Most large firms today, however, have multiple products. A company such as General Electric (GE)
operates in the areas of electricals, power plant equipment, medical equipment, transportation
machinery, jet engines, and a host of other businesses. Each of these businesses will have its own
separate business level strategy. But the corporation will also have a corporate level strategy. We will
look at this in detail in an elective course.
The headquarter of a large corporation such as GE, or the holding company of a large business house
such as Tata Sons will have an enterprise level strategy. Enterprise strategy deals with bigger
stakeholders such government, press, the public, and the like. Lobbying, public relations, CSR, and
dealing with long term political, technological, social, and global trends are part of enterprise strategy.
Functional Strategies, policies, and tactics:
At the lower level are functional strategies. These relate to the functions of an organization. A firm that
manufactures and markets a product will have manufacturing strategy, marketing strategy, HR strategy,
IT strategy, and the like. Each functional strategy will mesh with each other in a way as to together
achieve the overall objectives of the firm.
Policies translate strategies for the operating level executives to make implementation easier. Thus,
suppose a manufacturing and marketing firm with 10% market share is # 2 in an industry, and it plans to
become # 1 within the next 5 years by doubling its market share. It may plan to increase its market
share by 2-3% per year. It may plan to increase its advertising expenses by 5% per year, and its sales
force by 10% per year. These could be considered examples of marketing policies. It must expand its
manufacturing capacity at least by 15% per year, 10% of this could be through investment in new plant
and machinery, and 5% through increase in productivity. These could be considered examples of
manufacturing policies. HR must step up recruitment such that marketing and manufacturing
manpower increases by about 10% per year for the next 5 years. That would be an example of an HR
policy. Such quantitative targets provide good guidelines to operating managers and facilitate
implementation.