STRATEGIC MANAGEMENT

1) Definition of Strategic Management:

• When we talk about the functions of management, we find that strategy is one of the
most significant areas of decision-making in any organization. strategic management is an
art as well as a science of formulating, implementing and evaluating the decisions so as
to enable the organization to achieve its goals.
• The strategy is defined as a plan deployed at each level of management for the attainment
of objective and realization of long-term goals of the organization.
• It is a set of coherent actions which are performed in order to gain a sustainable
competitive advantage.
• It was derived from a Greek word ‘Strategos’, where ‘Stratos’ means army and ‘agos’
implies to lead.
• In management, strategy means a broad plan to stay ahead of others and achieve success.
Organizations create strategies to satisfy customers, survive competition, grow their
business, increase profits, and reach their goals. According to Glueck, strategy is an
integrated plan that connects a company’s strengths with market challenges to achieve
its main objectives effectively.

STRATEGIC MANAGEMENT: CONCEPT

• Strategic management means planning and using business strategies to help a company
achieve its goals and move from where it is today to where it wants to be in the future.
• Strategic management is the way an organization sets goals based on its vision and
mission, plans the steps to reach those goals, makes big decisions at the top level, and
guides everyone to work together so the company can compete, grow, and succeed long-
term.
• It starts by imagining a better future, choosing the right targets, and making smart use of
resources to beat competitors, all while making sure the organization can adapt and stay
strong as things change.
 • strategic management is the process of formulation and implementation of strategies
lying within the boundaries of the organizational resources in response to the
environmental opportunities and threats so as to achieve sustainable competitive
advantage over competitors.

Examples:

1. Toyota uses strategic management to systematically improve production and innovate,

maintaining global leadership in automobiles.
2. Apple leverages strategy to create an integrated ecosystem and deliver unique products
that build strong customer loyalty.
3. Tesla’s strategic management focuses on disrupting the market, scaling electric vehicles,
and building a competitive edge through innovation.
4. Starbucks relies on a strategy of brand engagement and continuous innovation, ensuring
premium positioning in the coffee market.
5. In India, the government adopts strategic management to improve transparency, reduce
corruption, and enhance efficiency with tools such as grievance redressal systems, ethical
training for employees, and ICT solutions for public departments.

2) Nature of Strategic Management:

 1. Provides Structure: Strategy offers a clear framework and direction for all organizational
activities.
2. Integrated Approach: It unites various functions, departments, and resources towards
shared goals.
3. Relates an Organisation with the Environment: Strategy connects the organization to
external opportunities and threats, ensuring alignment with the market.
4. Set of Actions: Strategy consists of planned steps and initiatives designed to reach
objectives.
5. Future-Oriented: It focuses on long-term vision and sustainability rather than short-term
gains.
6. Combination of Internal and External Factors: Strategy takes into account both the
organization’s strengths/weaknesses and external market conditions.
7. System-oriented: It considers the organization as a whole, emphasizing interdependence
of parts.
8. Involves Contradictory Actions: Strategy often requires balancing opposing demands,
such as cost-cutting versus innovation.

3) Dimensions of Strategic Management:

Dimensions of strategic management refer to the broad aspects that make up the strategic
management process, including formulation, implementation, evaluation, and various
perspectives.

strategic decisions are primarily made by top management because they set the overall direction
of the entire organization.

To understand how strategy works in different parts, the organization’s strategy is divided into
three levels:

1. Corporate Level

➢ This is the top-most level where decisions are made about the overall purpose and scope
of the organization, such as which industries or markets to enter.
➢ Example: Deciding to diversify into new sectors, acquire a company, or redesign the
organization structure.
➢ Important for big-picture planning and long-term growth.

2. Business Level

➢ Focuses on how each part or unit of the company competes in its specific market.
➢ Example: A company that makes trucks decides whether to compete on price or quality.
 ➢ It involves formulating strategies for each main product or service, emphasizing how to
stand out from competitors.

3. Functional Level

➢ Deals with specific departments like marketing, finance, production, HR, etc.
➢ Example: Marketing plans for promoting a new truck model.
➢ The goal here is to efficiently support the business strategy through specific activities.

Two Types of Organizations Based on Structure:

Multiple Business (SBUs):

Companies with diverse products or services, organized into independent units called Strategic
Business Units (SBUs).

Example: A textile and petrochemical company with separate SBUs for each product line.

Single Product Organizations: Focus only on one major product, like a company that only
manufactures heavy vehicles, where the corporate level strategy covers the entire business.

Features of Strategic Business Units (SBUs):

➢ Each SBU has its own goals, strategies, resources, and competition.
➢ An SBU is created for each distinct product or market segment.
➢ It manages its own resources and makes decisions based on its environment.
➢ Example: In a conglomerate like Unilever, SBUs may focus on personal care, foods, or
home products.

the dimensions of strategic management typically include:

Strategic Analysis: Understanding the internal and external factors affecting the organization
(e.g., SWOT analysis).

Strategy Formulation: Developing long-term plans and choosing the best strategic options.

Strategy Implementation: Executing the chosen strategy through allocation of resources and
operational changes.

Strategic Control and Evaluation: Monitoring performance and making adjustments to

strategies.

Leadership and Governance: Role of top-level management and boards in guiding strategy.
Resource Management: Efficient use and allocation of organizational assets (financial, human,
technological).

Organizational Culture and Values: Aligning company culture with strategic goals to foster
commitment.

Strategic Thinking and Innovation: Encouraging forward-looking, creative approaches to

strategy in a changing environment.

4) Need for Strategic Management:

The need for strategic management arises because it helps organizations navigate complexity,
set clear direction, and achieve long-term success. Here are key reasons why strategic
management is essential:

i. Provides Clear Goals: It helps establish transparent and unified goals for all employees to
align their efforts.
ii. Improves Decision-Making: Strategic management offers a framework for making
informed, data-driven decisions that support the organization’s objectives.
iii. Prepares for the Future: It enables organizations to plan for future opportunities and
challenges, staying ahead of competition.
iv. Increases Flexibility: Organizations become better at adapting to market changes,
technological shifts, and unforeseen events.
v. Optimizes Resource Use: Helps allocate resources efficiently across functions and
projects to maximize productivity and reduce waste.
vi. Enhances Coordination: Encourages collaboration among departments, ensuring
everyone works towards the same strategic goals.
vii. Reduces Risks: By anticipating potential risks and building mitigation strategies, it reduces
the impact of uncertainties on the business.
viii. Boosts Competitive Advantage: Helps organizations differentiate themselves, capture
market share, and sustain growth.
ix. Promotes Accountability: Strategic plans set performance benchmarks, enabling
progress tracking and accountability.
x. Improves Customer Satisfaction: By understanding customer needs better, strategy
helps tailor products/services to meet those needs.

Strategic management is crucial for organizational survival, growth, and achieving sustainable
success in a constantly changing environment.
5) Strategic Management- Process, Vision, Mission and Business definition

Process;

Strategic management is the way managers plan and make big decisions to help an organization
reach its goals. It’s a continuous process that involves:

Imagining the future: Thinking about where the organization wants to be someday.

Stating core values: Explaining what the organization stands for.

Analyzing environment: Looking at both inside the company and outside forces like market
trends or competitors.

Matching strengths and opportunities: Using what the organization is good at to make the most
of chances in the environment.

Allocating resources: Deciding where to put money, people, and time.

Creating and choosing strategies: Coming up with different plans and picking the best one.

Putting the plan into action: Making sure everyone understands and carries out the strategy.

Checking results: Measuring how well the strategy is working.

Making corrections: Changing the plan if things don’t go as expected.

This process helps managers decide smartly and lead the organization toward success.
Vision:

A vision of an organization is the expectation that the organization wants to fulfill.

Features of an Effective Organizational Vision

Reflects Future Goals:

The vision describes where the organization wants to be in the future, providing a clear picture
of its long-term aspirations.

Guides the Organization:

It acts as a roadmap, helping managers and employees focus on common goals and make
strategic decisions accordingly.

Achievable and Realistic:

The vision should be ambitious but possible to accomplish within the limits of the organization’s
resources.

Flexible and Adaptable:

It should be able to change in response to external factors like market changes, technological
advancements, or customer preferences.

Unique to the Organization:

Every organization’s vision should be different, reflecting its core values, purpose, and
distinctive identity.

Inspiring and Motivating:

The vision should energize and motivate employees, encouraging them to work towards a
shared dream.

Core Values Representation:

It should clearly communicate the fundamental beliefs and purpose of the organization.

Clear and Concise:

The vision statement should be simple, memorable, and easy to understand, often expressed in
one or two sentences.

Long-term Focus:
It emphasizes ongoing actions and future achievements, usually set for many years ahead (e.g.,
10-15 years).
Sets a Desirable Goal:
It establishes a compelling future goal that inspires commitment and enthusiasm among all
stakeholders.

An effective and clear vision statement provides an organization with a clear strategic direction
for future and sustainable advantage in the industry

Mission:

The mission of strategic management refers to the organization's fundamental purpose or

reason for existence. It explains what the organization does, who it serves, and how it operates
to fulfill its purpose. The mission guides decision-making and strategy formulation by defining
the organization's core business, its customers, products or services, and its values.

Key Points on Mission in Strategic Management:

➢ It defines the organization’s current business, its goals, and its role in society.
➢ It states why the organization exists and what it offers to its stakeholders.
➢ It guides employees and managers in aligning their efforts towards a common purpose.
➢ The mission supports the vision by providing specific direction and action plans.
➢ An effective mission statement is clear, concise, motivating, and relevant to the
organization’s capabilities and environment.

In short: The mission answers the question, "Why do we exist?" and provides a clear
understanding of the organization's purpose and primary objectives within strategic
management.
Models of Strategic Management:

1) Mintzberg Model:
Henry Mintzberg, a famous management thinker, described strategy as having five different
meanings, known as the “five ps of strategy” –

➢ plan,
➢ pattern,
➢ position,
➢ perspective,
➢ ploy.

This model helps us understand that strategy is not just a written plan but a combination of
past actions, future intentions, internal beliefs, and competitive moves that guide an
organization toward success.

1. Strategy as a pattern

When strategy is seen as a pattern, it means that an organization consistently follows a particular
behavior or course of action over time.

It reflects past actions that have become habits of the organization.

Example: a company that always focuses on innovation and premium products shows a pattern
of following a high-end strategy.

2. Strategy as a plan

When strategy is viewed as a plan, it means preparing for the future and deciding how to achieve
organizational goals.

It is an intended strategy that shows direction and vision.

Sometimes, the intended plan becomes the realized strategy (successful implementation), while
other times it may fail, becoming an unrealized strategy.

Example: a company planning to enter international markets but achieving it only in stages —
this becomes an emergent strategy, where plans develop step by step.

3. Strategy as a position

In this sense, strategy defines how an organization positions itself in the market.
It focuses on identifying and occupying a niche or unique place in the industry.

Example: a fast-food chain deciding to sell only vegan burgers in health-conscious cities is using
a position strategy.

Michael porter’s theories of competitive positioning are closely linked to this concept.

4. Strategy as a perspective

Here, strategy represents the organization’s mindset, vision, and culture.

It focuses on how the organization views itself and its purpose from the inside.

Example: apple’s internal belief in innovation and design excellence guides its strategic decisions.

It emphasizes the internal environment of the firm.

5. Strategy as a ploy

A ploy means using a specific tactic to outsmart competitors.

It is often short-term and focused on gaining an advantage.

Example: a company lowering prices temporarily to attract customers from rivals.

2) Ansoff Model:
The Ansoff Matrix, also known as the Product-Market Expansion Grid, is a strategic planning tool
that helps businesses evaluate and plan their growth strategies. It was introduced by Russian-
American mathematician and business theorist Igor Ansoff in 1957. The matrix is designed to
guide companies in making decisions about their product and market growth based on two key
dimensions: products and markets, suggesting four possible strategies for expansion: Market
Penetration, Market Development, Product Development, and Diversification.

1. Market Penetration (Existing Product – Existing Market)

This is the least risky growth strategy, as the company operates within familiar markets and
with known products.
The goal is to increase sales among existing customers or attract new ones within the same
market.
Common approaches include:

➢ Increasing marketing or promotional activities,

➢ Offering discounts or reducing prices,
➢ Acquiring competitors to gain a larger market share.

Example:
A packaged food company selling snacks in grocery stores may negotiate for more shelf space or
run promotional campaigns to boost sales.

2. Market Development (Existing Product – New Market)

This strategy involves selling current products in new markets, which could be new regions,
countries, or customer segments. It carries moderate risk since products are proven, but
markets are unfamiliar.
Approaches include:

➢ Expanding into new geographic regions (domestic or international),

➢ Targeting new customer demographics,
➢ Finding new uses for existing products.

Example:
Lululemon, known for its athleisure wear, expanded into Asia-Pacific markets to reach new
consumers, leveraging an already successful product line.

3. Product Development (New Product – Existing Market)

Here, the firm creates new products for its existing customer base.
It focuses on innovation and brand loyalty, relying on the company’s strong relationship with its
market.

Methods include:

➢ Investing in R&D to design new offerings,

➢ Acquiring rights to another company’s products,
➢ Launching white-label products under the existing brand.

Example:
A beauty brand with a loyal customer base for hair oils introduces a new shampoo line targeting
the same customers to increase overall sales.

4. Diversification (New Product – New Market)

This is the highest-risk growth strategy, as it involves entering new markets with new products.
However, it can bring high rewards by reducing dependence on one market or product line.

There are two types:

Related Diversification:
The new venture has a connection or synergy with the existing business.

Example: A leather shoe manufacturer producing leather car seats, utilizing similar materials
and expertise.

Unrelated Diversification:
The new business has no direct link with the existing operations.

Example: The same leather shoe company entering the consumer packaged goods sector to
reduce market risk.
Examples of Real-World Application

Apple Inc. demonstrates all four strategies:

Market Penetration: Promoting more iPhones in existing markets.

Market Development: Entering new markets like India.

Product Development: Launching Apple Watch and AirPods.

Diversification: Expanding into services like Apple TV+ and Apple Pay.

Ansoff’s Matrix is a roadmap that helps managers match products and markets strategically,
balancing risk, innovation, and opportunity for long-term success.

3) Porter Model:
The Porter’s Five Forces Model, developed by Michael E. Porter in 1979, is a powerful
framework used in strategic management to analyze the competitive environment of an
industry. It helps organizations understand the underlying forces that shape competition and
influence profitability and strategic positioning. By studying these five forces, managers can
design strategies to gain a sustainable competitive advantage.

According to Porter, “The state of competition in an industry depends upon five basic competitive
forces: threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining
power of suppliers, and industry rivalry.”

In simple words, the model identifies how each of these forces affects a company’s ability to
compete and earn profits within its industry.

1. Threat of New Entrants

This force examines how easy or difficult it is for new firms to enter an industry.
If entry barriers are low, new competitors can quickly capture market share, reducing profitability
for existing players.

Barriers to entry include:

➢ High capital requirements,

➢ Government regulations,
➢ Brand loyalty,
➢ Economies of scale.
Example:
In the aviation industry, new entrants face high costs and government regulations, so the threat
is low. In contrast, in e-commerce, where entry costs are lower, the threat is high.

2. Threat of Substitute Products or Services

This force refers to the availability of alternative products that can fulfill the same customer
needs. The higher the number of substitutes, the greater the competitive pressure and the lower
the industry profitability.

Example:

➢ Tea and coffee are substitutes.

➢ In transportation, Uber is a substitute for traditional taxis.

3. Bargaining Power of Buyers

This force determines the influence customers have on pricing and quality.
When buyers have more choices and information, they can demand better products at lower
prices.

Factors increasing buyer power:

➢ Few large buyers,

➢ Standardized products,
➢ Low switching costs.

Example:
In the automobile industry, large corporate fleet buyers (like rental companies) have high
bargaining power due to bulk purchases.

4. Bargaining Power of Suppliers

This force measures how much influence suppliers have over the cost and availability of inputs.
If there are few suppliers or their products are unique, they can charge higher prices and reduce
profitability.

Example:

In the semiconductor industry, companies like Intel and TSMC have strong bargaining power over
computer manufacturers.
5. Rivalry Among Existing Competitors

This force represents the intensity of competition within the industry.

High rivalry reduces profitability as firms compete through price cuts, advertising, and product
innovation.

Factors influencing rivalry:

➢ Number of competitors,
➢ Industry growth rate,
➢ Product differentiation,
➢ Exit barriers.

Example:
The smartphone industry shows intense rivalry between Apple, Samsung, and Xiaomi, leading to
continuous innovation and marketing battles.

Examples of Application

Coca-Cola vs. PepsiCo: Fierce rivalry but high entry barriers (brand and distribution) protect them
from new entrants.

Netflix: Faces substitute threats from YouTube and Disney+, forcing continuous innovation and
investment in original content.

Porter’s Five Forces Model provides a systematic approach to understanding industry

competition and profitability. By analyzing these forces, managers can identify where power
lies and develop strategies to strengthen their market position—such as innovation, cost
leadership, differentiation, and forming strategic alliances.
4) Prahalad and Gary Hamel model:

In the field of strategic management, C.K. Prahalad and Gary Hamel introduced the concept of
Core Competence of the Corporation in their famous 1990 Harvard Business Review article
titled “The Core Competence of the Corporation.”
Their model emphasizes that an organization’s competitive advantage and long-term success
depend not only on products or markets, but on its unique internal capabilities — known as
core competencies.

According to Prahalad and Hamel,

“Core competence is the collective learning and coordination skills behind the firm’s product
lines.”

In simple terms, core competence refers to the unique strengths, knowledge, technologies, and
skills that give a company an edge over its competitors and allow it to deliver unique value to
customers.

1. Meaning and Importance of Core Competence

Core competencies are not physical assets but intangible resources — a mix of technology, skills,
and processes that allow a firm to achieve efficiency and differentiation.
They form the foundation of competitive advantage and guide the company’s strategic direction.

For example:
Honda’s core competence lies in engine design and manufacturing, which is used across
motorcycles, cars, and power equipment.

2. Characteristics of Core Competencies

Prahalad and Hamel outlined three main criteria that a capability must fulfill to be considered a
core competence:

Provides Customer Value:

It must make a significant contribution to the customer’s perceived benefits.
Example: Sony’s miniaturization technology enhanced customer convenience through compact
electronic products.

Difficult for Competitors to Imitate:

The competence should be unique and complex, making it hard to copy.
Example: Apple’s design innovation and ecosystem integration are difficult to replicate.
Provides Access to a Wide Variety of Markets:
It should open up opportunities in multiple product lines or markets.
Example: 3M’s expertise in adhesives enables it to serve industries from healthcare to
consumer goods.

3. Relationship Between Core Competence and Competitive Advantage

Core competencies act as the roots of the organization, supporting various business units
(branches) and products (fruits).
They enable firms to innovate, adapt, and expand into new areas without starting from scratch.

Example:
Samsung’s core competence in electronics and display technology helps it compete successfully
in mobile phones, televisions, and semiconductors.

4. Strategic Implications

Focus on Strengths: Firms should identify and nurture their unique capabilities rather than
outsourcing them.

Resource Allocation: Invest in areas that enhance these competencies.

Long-term Vision: Build strategies around what the company does best instead of chasing short-
term market opportunities.

Prahalad and Hamel’s model teaches that real strength lies not in what a company sells, but in
what it uniquely knows and can do better than anyone else — its core competence.
5) McKinsey 7S Framework:
The McKinsey 7S Framework, developed in the early 1980s by Tom Peters and Robert
Waterman of McKinsey & Company, is a well-known model for organizational analysis and
strategic management. The model is based on the idea that success depends on the alignment
of seven interrelated factors, not just structure or strategy alone.

According to McKinsey,

“The 7S Framework is a management model that describes seven elements—Strategy, Structure,

Systems, Shared Values, Skills, Style, and Staff—that must be aligned for an organization to
achieve success.”

In simple words, it is a diagnostic tool that evaluates how well the internal components of an
organization work together to support its strategic goals.

The seven elements are divided into two categories:

➢ Hard Elements (Easier to Identify and Manage): Strategy, Structure, Systems

➢ Soft Elements (Culture and People-Oriented, Harder to Measure): Shared Values, Skills,
Style, Staff

1. Strategy

It refers to the long-term plan of action designed to achieve organizational goals and gain
competitive advantage.
A good strategy aligns with market conditions and utilizes organizational strengths effectively.
Example:
Apple’s strategy of differentiation through innovation and design has made it a global leader in
technology.

2. Structure

Structure defines the organizational hierarchy, reporting lines, and flow of authority.
It determines how activities are divided and coordinated.

Example:
Google’s flexible and flat organizational structure encourages creativity and collaboration among
teams.

3. Systems

Systems are the daily processes and procedures that guide operations and decision-making.
They ensure efficiency, control, and consistency across departments.

Example:
McDonald’s uses standardized operating systems for food preparation and service worldwide to
maintain quality.

4. Shared Values

At the core of the model are Shared Values, representing the organizational culture, beliefs,
and core principles that guide employee behavior.
They are the foundation upon which other elements are built.

Example:
Toyota’s shared value of “continuous improvement (Kaizen)” drives innovation and efficiency in
all operations.

5. Skills

Skills refer to the capabilities and competencies that exist within the organization.
They define what the company does best and where its expertise lies.

Example:
Microsoft’s core skills in software development and cloud computing form the base of its global
success.
6. Style

Style reflects the leadership approach and management culture within the organization.
It shapes how employees are motivated and how decisions are made.

Example:
At Infosys, leaders follow a participative management style that promotes transparency and
employee involvement.

7. Staff

Staff refers to the people within the organization, including their recruitment, development,
motivation, and career management.
Human capital is vital for strategy execution.

Example:
Google invests heavily in employee training, wellness, and creativity programs to retain top
talent.

How the 7S Framework Helps in Evaluation and Control

➢ Evaluation: The framework helps diagnose misalignments between elements. For

example, if a company’s strategy changes but its structure and systems remain outdated,
performance may decline.
➢ Control: It ensures that all seven elements support each other, creating balance and
consistency during organizational change, mergers, or restructuring.
➢ Strategic Fit: Managers can use it to align internal strengths with external opportunities
for improved effectiveness.

Example of Application

When Starbucks expanded globally, it used the 7S model to ensure alignment:

Strategy: Global expansion through premium experience.

Structure: Regional management teams.

Systems: Quality control and supply chain management.

Shared Values: Focus on customer experience and community.

Skills: Coffee expertise and customer service.

Style: Empowering leadership culture.

Staff: Training baristas for consistent service globally.

This alignment helped Starbucks maintain quality and brand consistency across markets.

The McKinsey 7S Framework is an effective tool for analyzing organizational effectiveness and
guiding strategic change.
It reminds managers that success depends on coherence among all seven factors, not just on
strategy or structure.