Strategic Management

CA – Inter
 Chapter 1
Introduction to SM

For concept clarity

What is Business

As per famous management guru

'Peter F Drucker,

Business exist for profit

For concept clarity
Objectives of Business;
▪ Survival,
▪ Stability,
▪ Efficiency,
▪ Growth,
▪ Profitability,
▪ Wealth Maximization.

For concept clarity

RELATIONSHIP BETWEEN ORGANIZATION & ENVIRONMENT

Environment

Internal External
Factor Forces
(S & W) (O & T)
Controllable Uncontrollable
For concept clarity
RELATIONSHIP BETWEEN ORGANIZATION & ENVIRONMENT
External environment;
→ Micro;
Affect any one or more organization.
→ Macro;
Affect entire industry at large.

Organization levels;

1. Top Level,

2. Middle Level, &

3. Lower Level.
Strategic Levels of the Organizations;

1. Top Level,

2. Middle Level, &

3. Lower Level.

For concept clarity

Planning ≠ Strategy?
Environment Analysis
Competitive forces

Planning + Analysis + Course of Action = Strategy

Favourable - Attack - Growth & Expansion

Unfavourable - Defend - To maintain stability
Q.1 Enumerate business policy.
Business Policy;
Introduction;
Business Policy is "the study of the functions (i.e.
roles) & responsibilities of senior (i.e. top)
management, the crucial problems that affect
success in the total enterprise and the decisions.

Business Policy are the guidelines developed by an

organization to govern the actions of those who are a
part of it.

Business Policy;
Business Policy defines the scope within which
decisions may be taken by the subordinates in an
organization.

When Harvard Business School introduced an

integrative course in management aimed at the
creation of general management capability among
business executives. The origin of business policy can
be traced back to 1911.
Business Policy;
According to William F Glueck, evolution of
business policy emerged from the development in
the use of planning techniques by managers.

Starting from day-to-day planning in earlier times,

managers tried to anticipate the future through
preparation of budgets and using control systems
like capital budgeting and management by
objectives.

Business Policy;
With the inability of these techniques to adequately
emphasize the role of future, long-range planning
came to be used.

Soon, long-range planning was replaced by strategic

planning, and later by strategic management, a term
that is currently used to describe the process of
strategy formulation, implementation and control.
What is strategic management?
Introduction;
The term strategy has been derived from the Greek
word' strategos' which means generalship.

Business today is like fighting a war & Businessmen

have to respond to the dynamic & hostile
(unfriendly) environment. Every businessman
makes use of strategies to face the tricks of his enemy
(rivals).
What is strategic management?

Strategy may be defined as a long-range blueprint of

an organization, desired image, direction &
destination.

What is strategy?
William F. Glueck:
Unique
Formulate,
A unified, Implement,
Evaluation

Comprehensive and
At 3 levels of Org.

Integrated Plan

designed to assure that the basic objective

of the enterprise are achieved.

Profit &
Non – Profit
What is strategic management?
Strategic Management can be defined as,
✓ The art and science of
✓ Formulating,
✓ Implementing &
✓ Evaluating
✓ Cross - Functional decisions
✓ That enable an organization to achieve it's objectives.

Classification of Strategy based on approach;

Anticipate Strategy Unanticipated

d

Pro-active Reactive
Strategy Strategy

Planned Strategy, Adaptive Strategy,

Intended Strategy
Classification of Strategy based on approach;
Refer ICAI study material (1.6)
▪ Company experience,
▪ Knowhow, (Mgr. & Tech.) This parameter Pro-active
▪ Org. Objectives, Provides base for Strategy
▪ S&W

Strategy

▪ Competitors Strategies, Reactive

Req. changes in
▪ Market Changes. Strategy
Planned strategy

Q.2 "Strategy is partly proactive and

partly reactive." do you agree?

Refer ICAI study material Q.5 (1.20)

Strategy is partly proactive & partly reactive;
In Proactive Strategy, organizations will analyze possible
environmental scenarios and create strategic framework
after proper planning, set procedures and work on these
strategies in a predetermined manner.

However, in reality no company can forecast both internal

and external environment exactly. Everything cannot be
planned in advance.

Strategy is partly proactive & partly reactive;

It is not possible to anticipate moves of rival firms,
consumer behavior, evolving technologies and so on.

There can be significant deviations between what was

visualized and what actually happens.

Strategies need to be modified in the light of possible

environmental changes. There can be significant or major
strategic changes when the environment demands.
Strategy is partly proactive & partly reactive;
It is based on unanticipated events such as Competitor's
strategies, Market changes, therefore it requires a change in
planning.

Reactive strategy is triggered by the changes in the

environment and provides ways and means to cope with
the negative factors or take advantage of emerging
opportunities.

Hence Strategy is partly proactive & partly reactive.

Q.3 Define Strategy and its feature

Features of Strategic Management;
▪ A typical dictionary defines the word 'strategy' as
something that has to do with war and ways to win over
enemy.

▪ Strategy is forward looking it defines in broad terms the

action which an organization proposes to take in future.

▪ Strategy is designed to move an organization from its

current position to the desired future position.

Features of Strategic Management;

▪ However, strategy is not a substitute for sound, alert and
responsible management.

▪ Strategy can never be perfect, flawless and optimal.

▪ Allowances (provision) are made for possible

miscalculations and unanticipated events.

▪ In large organisations, strategies are formulated at the

corporate, business (divisional) and functional
(operational) levels.
Features of Strategic Management;
▪ Corporate strategies are formulated by the top
managers.

▪ Strategic Management is essential for the survival and

growth of business organizations in dynamic business
environment.

Q.4 Strategic management is a bundle of

tricks and magic? Do you agree?
No, The term 'strategic management' refers to the
managerial process of;
▪ Developing a strategic vision,
▪ Setting objectives,
▪ Crafting a strategy,
▪ Implementing,
▪ Evaluating the strategy and
▪ Initiating corrective adjustments where deemed
▪ appropriate.
Hence Strategic management is not a bundle of tricks and
magic.

Q.5 Define Strategic management and

objectives of strategic management?
The overall objectives of SM are two-fold;
▪ To create competitive advantage,
So that the company can gain competitive
advantage over competition and
dominate the market.

▪ To guide the company successfully

through all changes in the environment.

Q.6 What is Strategic Management?

What benefits accrue by following a
strategic approach to managing?

Refer ICAI study material Q.2 (1.18)

Importance (Benefits) of SM;
Introduction;
*(Refer intra of SM & its objectives)
Importance of Strategic management;
▪ The strategic management gives a direction to the
company to move ahead.
▪ It defines the goals and mission.

Importance (Benefits) of SM;

▪ It helps management to define realistic objectives and
goals which are in line with the vision of the company.

▪ Strategic management helps organisations to be

proactive instead of reactive in shaping its future.

▪ Organisations are able to analyse and take actions

instead of being mere spectators.
Importance (Benefits) of SM;
▪ Strategic management attempt to prepare the
organisation to face the future and act as pathfinder to
various business opportunities.

▪ Strategic management serves as a corporate defence

mechanism against mistakes and pitfalls.

▪ It helps the organisation to develop certain core

competencies & competitive advantages that would
facilitate assist in its fight for survival and growth.

Q.7 Are there any limitations

(Drawbacks) attached to strategic
management in organizations? Discuss.

Refer ICAI study material Q.3 & 7

Limitations of Strategic Management;
Introduction;
The presence of strategic management cannot
counter all hindrances and always achieve success.

Limitations of Strategic management;

▪ Strategic management is a costly process.
▪ Strategic management is a time-consuming process.

Limitations of Strategic Management;

▪ Environment is highly complex and turbulent (i.e.
unstable).

▪ The organisational estimate about its future shape may

inadequately go wrong and jeopardise (i.e. causing harm
to) all strategic plans.

▪ It is difficult to understand the complex environment and

exactly pinpoint how it will shape up in future?

Limitations of Strategic Management;

▪ It is difficult to clearly estimate the competitive responses
to a firm's strategies.
Organisation levels;

1. Top Level,

2. Middle Level, &

3. Lower Level.
Strategic Levels of the Organizations;

1. Top Level,

2. Middle Level, &

3. Lower Level.

Strategic Levels of the Organizations;

Refer ICAI study material (1.11) *Only for academic interest

Corporate level of management consists of;
▪ The Chief Executive Officer (CEO),
▪ Other Senior Executives,
▪ The Board of Directors (BOD) and
▪ Corporate Staff

Those individuals are mainly strategic decision-making

authority of the organisation.

Q.8 What tasks are performed by a

strategic Manager?
Task performed by a strategic manager;
Introduction;
The primary task of the strategic manager is
conceptualizing, designing and executing company
strategies. For this purpose, his tasks include.

Task;
▪ To set corporate vision, mission and goals,
▪ Determining what business it should be in,

Task performed by a strategic manager;

▪ Allocation of resources,

▪ Formulating strategies,

▪ Implementing strategies,

▪ Providing leadership to the organisation, etc ...

Q.9 Explain the difference between
three levels of strategy formulation

Refer ICAI study material Q.4 (1.19)

Difference between three levels;

1 . Corporate Level;
Consist of? Chief executive officer and other top-level
executives.
Role's; To oversee the development of strategies for
the whole organization.
Scope; Defining the mission and goals of the
organization, determining what businesses
it should be in, allocating resources among
the different businesses and so on rests at
the Corporate Level.
Difference between three levels;
2. Business Level;
Consist of? General Manager or Divisional Manager &
Staff.
Role's; To translate the general statements i.e.
strategies into concrete strategies of their
individual businesses.

Scope; The development of strategies for

individual business areas. To support
corporate strategy. Such divisions are called
Strategic Business Units (SBUs).

STRATEGIC INTENTION (PURPOSE)

Definition;
Strategic Management is defined as a dynamic process of;
▪ Formulation,
▪ Implementation,
▪ Evaluation, and
▪ Control of strategies
to realise the organization's strategic intent.
STRATEGIC INTENTION (PURPOSE)
Introduction;
The intentions with which organisational managers plans
the future course of action, that intention is known as
strategic intent.

Strategic intent is the base of all the activities every

manager at all levels are doing to achieve organisational
goals.

STRATEGIC INTENTION (PURPOSE)

It is the fire within the organisational officers which
keeps them moving more closer to the objectives and
goals instead they face the hardest challenge and
unfriendly business environment.
▪ Strategic intent refers to purposes of what the
organization strives for.
▪ Senior managers must define "what they want to do" and
"why they want to do".
STRATEGIC INTENTION (PURPOSE)
▪ "Why they want to do" represents strategic intent
(purpose) of the firm.
▪ Strategic intent can be understood as the philosophical
base of strategic management.
▪ Clarity in strategic intent is extremely important for the
future success and growth of the enterprise, irrespective
of its nature and size.
Elements of Strategic Intent;
Vision;
Vision implies the blueprint of the company's future
position. It describes where the organization wants to land.
It represent the organisation's aspirations and provides a
glance of what the organization would like to become in
future.

Every sub system of the organization is required to follow

its vision.

Elements of Strategic Intent;

Mission;
Mission describe the firm's business, its goals and ways to
reach the goals. It explains the reason for the existence of
the firm in the society.

It is designed to help potential shareholders and investors

understand the purpose of the company.
Elements of Strategic Intent;
Mission;
A mission statement helps to identify, ‘what business the
company undertakes.' It defines the present capabilities,
activities, customer focus and role in society.

Elements of Strategic Intent;

Business Definition;
It tries to explain the business undertaken by the firm,
with respect to the customer needs, target markets, and
alternative technologies. With the help of business
definition, one can ascertain the strategic business choices.

Organisational restructuring also depends upon the

business definition.
Elements of Strategic Intent;
Business Model;
Business model, as the name implies is a strategy for the
effective operation of the business, ascertaining sources of
income, desired customer base, and financial details.

Rival firms, operating in the same industry rely on the

different business model due to their strategic choice.

Elements of Strategic Intent;

Goals and Objectives;
These are the base of measurement. Goals are the end
results, that the organization attempts to achieve.

On the other hand, objectives are time-based measurable

targets, which help in the accomplishment of goals.
Elements of Strategic Intent;
Goals and Objectives;
These are the end results which are to be attained with the
help of an overall plan, over the particular period.

However, in practice, no distinction is made between goals

and objectives and both the terms are used
interchangeably.

Vision;
Introduction;
The most important issue organisational managers need to
work on is clarity of destination i.e. where they want the
organisation to be in specified time period.

Where to go is the most important question and should be

always asked before planning how to go.
(mean before selecting the approach)
Vision;
Strategic Vision thus points out a particular direction,
draw a strategic path to be followed in future, and
moulding organizational identity.

“to make people happy”

Vision;
A Strategic vision is a road map of a company's future -
providing specifics about technology and customer focus,
the geographic and product markets to be pursued, the
capabilities it plans to develop, and the kind of company
that management is trying to create.
Vision;
▪ Vision implies the blueprint of the company's future
position.

▪ A strategic vision shows management's aspirations for

the business, providing a view of "where we are going”.

▪ It describes where the organisation wants to land.

▪ Every sub system of the organization is required to

follow its vision.

The three elements of a strategic vision are;

1. "Who we are and where we are now?"
2. "Where we are going?"
3. Communicating the strategic vision in clear, exciting
terms that inspire organization wide commitment.
Essentials of a strategic vision are;
▪ The entrepreneurial challenge in developing a strategic
vision is to think creatively about how to prepare a
company for the future.

▪ A well-articulated i.e. developed strategic vision creates

enthusiasm among the members of the organisation.

▪ Forming a strategic vision IS an exercise in intelligent

entrepreneurship.

Essentials of a strategic vision are;

▪ The best-worded vision statement clearly enhances the

direction in which organization is headed.
Mission;
Introduction;
A mission is an answer to the basic question 'what business
are we in and what we do'.

It has been observed that many firms fail to conceptualise

and develop the mission and business definition with the
required clarity. Such firms are seen to fumble in the
identification of opportunities and fail in formulating
strategies to make use of opportunities.

Mission;
A company's mission statement is typically focused on its
present business scope - i.e. "who we are? And what we
do?".

Mission statements broadly describe organizations;

✓ Present capabilities,
✓ Customer focus,
✓ Activities, and
✓ Business makeup.
Mission;
▪ Mission statement should reflect the philosophy of the
organizations that is perceived by the senior managers.

▪ A good mission statement should be precise, clear,

feasible, distinctive and motivating.

▪ The mission is a statement which defines the role that an

organization plays in the society.

Mission;
▪ Mission and business definition, as the two ideas are
absolutely central to strategic planning.

“to entertain inform and inspire people”

Why an organization should have a mission?
▪ To ensure consensus of purpose within the
organization.

▪ To develop a basis, or standard, for allocating

organizational resources.

▪ To provide a basis for motivating the use of the

organization's resources.

▪ To establish a general tone or organizational climate.

Why an organization should have a mission?

▪ To serve as a focal point.

▪ To facilitate the translation of objective and goals into a

work structure.

▪ To specify organizational purposes.

Points (tips) to be considered while writing
mission statement;
▪ To establish the special identity of the business - one
that typically distinct it from other similarly positioned
companies .

▪ Needs which business tries to satisfy, customer groups it

wishes to target and the technologies and competencies
it uses and the activities it performs.

Points (tips) to be considered while writing

mission statement;
▪ Good mission statements should be unique to the
organisation for which they are developed.

▪ The mission of a company should not be to make profit.

Surpluses may be required for survival and growth, but
cannot be mission of a company.
Goals and Objectives;
Introduction;
These are the base of measurement.
▪ Goals are the end results, that the organization attempts
to achieve .

▪ Objectives are time-based measurable targets, which

help in the accomplishment of goals.

Goals and Objectives;

However, in practice, no distinction is made between goals
and objectives and both the terms are used interchangeably.

Objectives are organization's performance targets.

The results and outcomes it wants to achieve. Objective
function as yardsticks for tracking an organization's
performance and progress.
Goals and Objectives;
Business organization translates their vision and mission
into goals and objectives.

Goals and Objectives;

Characteristics of Objectives:
▪ Objectives should define the organization's relationship
with its environment.

▪ Objectives should be facilitative towards achievement

of mission and purpose .

▪ Objectives should provide the basis for strategic

decision-making.
Goals and Objectives;
Characteristics of Objectives:
✓ Objectives should be measurable and controllable .
✓ Objectives should provide standards for performance
appraisal.
✓ Objectives should be concrete and specific .
✓ Objectives should be related to a time frame .
✓ Objectives should be challenging.

Goals and Objectives;

Long-term objectives;
As a rule, a company's set of financial and strategic
objectives ought to include both short-term and long-term
performance targets.

Long-term objectives represent the results expected

from pursuing certain strategies.

The time frame for objectives and strategies should

be consistent, usually from two to five years.
Goals and Objectives;
Long-term objectives;
To achieve long-term prosperity, strategic planners
commonly establish long-term objectives in seven areas.

1. Profitability.
2. Productivity.
3. Competitive Position.
4. Employee Development.
5. Employee Relations.
6. Technological Leadership.
7. Public Responsibility.
Corporate Mission
1. Corporate Mission is an expression of growth of the
Firm.
[Firm's future Visualized]
2. It provides dramatic picture of What the company wants
to become.
3. Its a Colourful Sketch of how the firm wants its Future to
look.
4. In other words the Mission is a grand design of the Firm's
future.
5. Mission amplifies what brings the firm to this business or
why it is there.
6. Mission is also an expression of the Vision of the
Corporation, its Founder / Leader.
7. It represents the Common purpose which the entire firm
shares and pursues.
8. It is not a confidential affair to be confined at the top it
has to be open to the Company entire
9. It adds zeal to the Firm and its People

Every organisation function through a network of goals and

Objectives it is foundation from which the network of goals
are built.

A Mission however is not a PR document its main purpose is

to give internal direction for the future of the Company.
Concept 8: Values:

"Business, as I have seen it, places one demand on you: it needs

you to self-impose a framework of ethics, values, fairness and
objectivity on yourself at all times." – Ratan N Tata, 2006
(Source: TATA Group Website)
A few common examples of values are - Integrity, Trust,
Accountability, Humility, Innovation, and Diversity. But why
are values so important? A company's value sets the tone for
how the people of think and behave, especially in situations of
dilemma. It creates a sense of shared purpose to build a strong
foundation and focus on longevity of the company's success.
Employees prefer to work with employers whose values
resonate with them - the ones they can relate to in their daily
work and personal life. Interestingly, majority of consumers
say that they would prefer to buy products and services from
companies that have a purpose that reflects their own value
and belief system. Hence, values have both internal as well as
external implications.
For reference, a lot of values were put to actions during Covid
19 pandemic when leaders of the organisations put people
before everything else. It projected how deep the foundation
of the oragnisations' were and how important it was for them
to uphold their core values.