Chapter 1: Introduc on to Strategic Management

Meaning:

(A) The term ‘management’ is used to refer to a key group in an organisa on in-charge of its affairs.
management is the chief organ entrusted with the task of making it a purposeful and produc ve en ty, by
undertaking the task of bringing together and integra ng the disorganized resources of manpower, money,
material, and technology, which are then combined into a func oning whole.

The survival and success of an organisa on depends on the competence and character of its management.

(B) The term ‘Management’ is also used to refer to a set of interrelated func ons and processes carried out by
the management of an organisa on. These func ons include Planning, Organising, Direc ng, Staffing and
Control. The func ons or sub-processes of management are wide-ranging but closely interrelated.

Management is an influence process to make things happen, to gain command over phenomena, to
induce and direct events and people in a par cular manner. Influence is backed by power, competence,
knowledge and resources.

Concept of Strategy:

William F. Glueck :

A unified, comprehensive, Long term and integrated plan designed to assure that the basic objec ves of the
enterprise are achieved.

Que. “Strategy is Partly Proac ve and Partly Reac ve.” Discuss.

Strategy is partly proac ve and partly reac ve: A company’s strategy is a blend of:

 Proac ve ac ons on the part of managers to improve the company’s market posi on and financial
performance.
 Reactions to unanticipated developments and fresh market conditions in the dynamic business
environment.

Strategy partly is deliberate and proac ve, as the product of management’s analysis and strategic thinking about
how to posi on the company in the marketplace.

However, not every strategic move is the result of proac ve planning and deliberate management design. Things
happen that cannot be fully planned for. When market and compe ve condi ons change, some kind of strategic
reac on or adjustment is required.

Strategy is partly proac ve and partly reac ve. In proac ve strategy, organiza ons will analyze possible
environmental scenarios and create strategic framework a er proper planning and 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. It is not possible to an cipate moves of
rival firms, consumer behaviour, evolving technologies and so on.

There can be significant devia ons between what was visualized and what actually happens. Strategies need to be
a uned or modified in the light of possible environmental changes. There can be significant or major strategic
changes when the environment demands. Reac ve strategy is triggered by the changes in the environment and
provides ways and means to cope with the nega ve factors or take advantage of emerging opportuni es.

Objec ves of Strategic Management:

The objec ves of strategic management are two-fold:

 To create compe ve advantage (something unique and valued by the customer), so that the company
can outperform the compe tors in all aspects of organisa onal performance.

 To guide the company successfully through all changes in the environment. That is to react in the right
manner.

the term ‘strategic management’ refers to the managerial process of developing a strategic vision, se ng
objec ves, cra ing a strategy, implemen ng and evalua ng the strategy, and finally ini a ng correc ve
adjustments were deemed appropriate. The process does not end, it keeps going on in a cyclic manner.

Importance of Strategic Management:

The major benefits of strategic management are:

 The strategic management gives a direc on to the company to move ahead which are in line with the
vision of the company.
 Strategic management helps organisa ons to be proac ve instead of reac ve. Organisa ons are able to
analyse and take ac ons instead of being mere spectators. They are able to control their own des ny in a
be er manner.
 Strategic management provides frameworks for all major decisions of an enterprise such as decisions on
businesses, products, markets, manufacturing facili es, investments and organisa onal structure.
 Strategic management seeks to prepare the organisa on to face the future and act as pathfinder to
various business opportuni es. Organisa ons are able to iden fy the available opportuni es and reach
them.
 Strategic management serves as a corporate defence mechanism against mistakes. It helps organisa ons
to avoid costly mistakes in product market choices or investments.
 Strategic management helps to enhance the Lifespan of the business.
 Strategic management helps the organisa on to develop certain core competencies and compe ve
advantages that would facilitate assist in its fight for survival and growth.
Limita ons of Strategic Management:

 Environment is highly complex and turbulent. It is difficult to understand the complex environment and
how it will shape-up in future. The organisa onal es mate about its future may go wrong and disturb all
strategic plans. The environment affects as the organisa on has to deal with suppliers, customers,
governments and other external factors. Thus, relying on a business strategy blindly could go wrong if the
environment is turbulent.

 Strategic management is a me-consuming process. Organisa ons spend a lot of me in preparing,

communica ng the strategies that may disturb daily opera ons and nega vely impact the rou ne
business. Planning and strategizing are important but pu ng them in ac on is where the actual success
lies.

 Strategic management is a costly process. Strategic management adds a lot of expenses to an

organiza on. Expert strategic planners need to be engaged, efforts are made for analysis of external and
internal environments devise strategies and properly implement. These can be really costly for
organisa ons with limited resources par cularly for small and medium organisa on. Strategic
Management requires experts, and these experts are costly resources. Thus, the process as a whole
required good amount of funds to be spent.

 In a compe ve scenario, where all organisa ons are trying to move strategically, it is difficult to clearly
es mate the compe ve responses to a firm’s strategies. It is quite difficult to measure the strategic
planning of compe tors because most of these decisions are taken within closed doors by the top
management.

Strategic Intent:

 Strategic intent implies the purposes, which an organisa on tries to achieve.

 Strategic intent gives an idea of what the organisa on desires to achieve in future.

Que: What are the Elements/ Components of Strategic Intent?

1. Vision: Vision implies the blueprint of the company’s future posi on. It describes where the organisa on wants
to land. It shows the organisa on’s aspira ons and provides a glimpse of what the organisa on would like to
become in future. Every sub system of the organisa on is required to follow its vision.

2. Mission: Mission describes 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. A mission statement helps to iden fy, ‘what business the firm undertakes.’
It defines the present capabili es, ac vi es, customer focus and role in society.

3. Goals and Objec ves: Objec ves are organisa on’s performance targets – the results and outcomes it wants to
achieve. They func on as benchmark for tracking an organisa on’s performance and progress.

All organisa ons have objec ves. The achievement of objec ves is an unending process. They provide meaning and
sense of direc on to organisa onal effort. Organisa onal structure and ac vi es are designed, and resources are
allocated around the objec ves to facilitate their achievement. They also act as benchmarks for guiding
organisa onal ac vity and for evalua ng how the organisa on is performing.
4. Values/ Value System: Values are the deep-rooted principles which guide an organisa on’s decisions and
ac ons. Core values are inherent and sacred; they can never be compromised, either for convenience or short-term
economic gain. Values reflect the values of the company’s founders. They are the source of a company’s
dis nc veness and must be maintained at all costs.

Vision: (5 Marks Ques on)

Define: Vision implies the blueprint of the company’s future posi on. It describes where the organisa on wants to
land. It shows the organisa on’s aspira ons and provides a glimpse of what the organisa on would like to become
in future. Every sub system of the organisa on is required to follow its vision.

A clearly ar culated strategic vision communicates management’s aspira ons to stakeholders and helps manage
the energies of company personnel in a common direc on.

Essen als of a strategic vision

 The entrepreneurial challenge in developing a strategic vision is to think crea vely about how to prepare a
company for the future.
 Forming a strategic vision is an exercise in intelligent entrepreneurship.
 A well-ar culated strategic vision creates enthusiasm among the members of the organisa on.
 The best-worded vision statement clearly shows the direc on in which organisa on is moving.

Mission:

Que: Why should an Organisa on have a mission?

 To ensure unanimity of purpose within the organisa on.

 To develop a basis, for alloca ng organisa onal resources.
 To provide a basis for mo va ng the use of the organisa on’s resources.
 To establish a general tone or organisa onal climate.
 To serve as a focal point for those who can iden fy with the organisa on’s purpose and direc on.
 To facilitate the transla on of objec ve into a work structure to responsible elements within the
organisa on.
 To specify organisa onal purposes in such a way that cost, me, and performance parameters can be
assessed and controlled.

Points are useful while wri ng a mission of a company:

♦ One of the roles of a mission statement is to give the organisa on its own special iden ty, business emphasis and
path for development – one that typically sets it apart from other similarly posi oned companies.

♦ A company’s business is defined by what needs it is trying to sa sfy, which customer groups it is targe ng and
the technologies and competencies it uses and the ac vi es it performs.

♦ Good mission statements are – unique to the organisa on for which they are developed.
Goals and Objec ves:

Characteris cs of Objec ves: (SMART 5C)

♦ They should provide the basis for strategic decision-making.

♦ They should be facilita ve towards achievement of mission and purpose.

♦ They should provide standards for performance appraisal.

♦ Objec ves should define the organisa on’s rela onship with its environment.

♦ They should be related to a me frame.

♦ They should be concrete and specific.

♦ They should be measurable and controllable.

♦ They should be challenging.

♦ Different objec ves should correlate with each other.

♦ Objec ves should be set within the constraints of organisa onal resources and external environment.

Que: What is the Need for Shot-term and Long term Objec ves?

Define: Objec ves are organisa on’s performance targets – the results and outcomes it wants to achieve. They
func on as benchmark for tracking an organisa on’s performance and progress.

All organisa ons have objec ves. The achievement of objec ves is an unending process. They provide meaning and
sense of direc on to organisa onal effort. Organisa onal structure and ac vi es are designed, and resources are
allocated around the objec ves to facilitate their achievement. They also act as benchmarks for guiding
organisa onal ac vity and for evalua ng how the organisa on is performing.

A company’s set of financial and strategic objec ves should include both short-term and long-term performance
targets. Having quarterly or annual objec ves focuses a en on on delivering immediate performance
improvements. Targets to be achieved within three to five years’ need considera ons of what to do now to put the
company in posi on to perform be er down the road.

To achieve long-term prosperity, companies establish long-term objec ves in seven areas.

♦ Profitability ♦ Employee Rela ons ♦ Employee Development

♦ Produc vity ♦ Technological Leadership

♦ Compe ve Posi on ♦ Public Responsibility

Values:

A few common examples of values are – Trust, Humility and Innova on

company’s value sets the tone for how the people think and behave, especially in situa ons of conflict. It creates a
sense of shared purpose to build a strong founda on and focus on longevity of the company’s success. Employees
prefer to work with employers whose values allign with majority of consumers prefer to buy products and services
from companies that reflects their own value and belief system. Hence, values have both internal as well as
external implica ons.

Strategic Levels in Organisa ons:

there are three main levels of management:

 Corporate level
 Business level
 Func onal level

The corporate level of management consists of the Chief Execu ve Officer (CEO), other senior execu ves, the board
of directors, and corporate staff. The role of corporate-level managers is to oversee the development of strategies
for the whole organiza on. This role includes defining the mission and goals of the organiza on, determining what
businesses it should be in, alloca ng resources among the different businesses, formula ng and implemen ng
strategies that cover all businesses, and providing leadership for the organiza on as a whole.

a strategic business unit is a self-contained division (with its own func ons - For example, finance, purchasing,
produc on, and marke ng departments) that provides a product or service for a par cular market. The principal
general manager at the business level, or the business-level manager, is the head of the division. The strategic role
of these managers is to translate the general statements of direc on and intent that come from the corporate level
into concrete strategies for individual businesses. Thus, whereas corporate-level managers are concerned with
strategies that cover individual businesses, business-level managers are concerned with strategies that are specific
to a par cular business.
Func onal-level managers are responsible for the specific business func ons or opera ons (human resources,
purchasing, product development, customer service, and so on) that cons tute a company or one of its divisions.
Thus, a func onal manager’s sphere of responsibility is generally confined to one organiza onal ac vity, func onal
managers have a major strategic role: to develop func onal strategies in their area that help fulfill the strategic
objec ves set by business- and corporate-level general managers.

Network of rela onship between the three levels:

There are 3 major types of networks of rela onship between the levels;

♦ Func onal and Divisional Rela onship: It is an independent rela onship, where each func on or a division is run
independently headed by the func on head, repor ng directly to the business head. Func ons maybe like Finance,
Human Resources, Marke ng, etc.

♦ Horizontal Rela onship: All posi ons, from top management to staff-level employees, are in the same
hierarchical posi on. It is a flat structure where everyone is considered at same level. This leads to openness and
transparency in work culture and focused more on idea sharing and innova on. This type of rela onship between
levels is more suitable for startups where the need to share ideas with speed is more desirable.

♦ Matrix Rela onship: It features a grid-like structure of levels in an organisa on, with teams formed with people
from various departments that are built for temporary task-based projects. This rela onship helps manage huge
companies with ease. In Matrix rela onship - there are more than managers for each teams.

Rela onship Benefits Drawbacks Suitability for AI

Leadership
Func onal Specializa on, clear Poten al for Less effec ve for cross-
and management of func ons departmental isola on, func onal AI projects.
Divisional and products. limited collabora on.
Horizontal Open communica on, Hard to scale, unclear Suitable for startups, less
encourages innova on roles and responsibili es. for large AI ini a ves.
and fast idea sharing.
Matrix Facilitates crossfunc onal Complex repor ng Ideal for managing
collabora on, flexible structures, poten al diverse, innova ve AI
resource management for conflicts. projects.
complex projects.
Table from the answer of Case Scenario 5