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Module l- Introduction to Strateeic Manasement

MODULE-I: Introduction to Strategic management

Deflnition. meaning. relevance, characteristics, A Model of strategic management process,
Approaches to strategic decisions making. Pitfalls in strategic management, Strategists and

thcir rolcs in strategic managemcnt.

Stratcgy is a broad concept that covers a multitude of different issues, concepts, and methods.

Many topics are considered in the formulation and implementation of strategy including industrl, analysis, competitors analysis, ethics, strengths/weakness, value creation, tcchnology, innovation, product development, diversification, balancing the needs of various
stakeholdcrs, strategic alliancc, organizations design, virtual organization, rcward corporate culturcs and corporate governance.


Evcry busincss organization of all sizes must prepare for an increaiingly complcx futurc,
companies must deal with variety of strategic, technological and organizational forces on a

daily bases. All these forces work together to redefine the economics and competitive
landscape o1'the industry. l;orward looking tirms


seek to create new sources


compctitivc advantagc by participating and shaping how industries evolve in the times ahead. Yct somc challcngcs also thrcatcn to crodc the long held competitive advantage of companies
that arc slow to rcacl or unable to mount an effective response.

Iror practicing managcrs and lcadcrs, stratcgy is at thc centcr of thc effort to crcatc valuc lor
customers, to respond to competitive challenge, and to build strong organizations.

Globalization has bccomc ctchcd in our compctitive landscapc, including new opportunitics
and thrcats from emcrging and developing countries that are fast becoming vibrant

cornpetitors. Companies are continuing to innovate breakthrough products and services and tcohnologics to servc customers at cver faster rates. They arc planning and organizing thcir activities using new methods, tcchniques and modes of operations, especially with the
pervasiveness of tlre Internet arrd the rise of

'virtual' ways of doing the things. They


rcaching to nerv custonrers in new parts of the world they never previously entered.

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Module L lntroduction to Strategic Management

'l'oday all firms will necessarily compete with each other in the same way. l-lach firm is likely to dcvisc its own stratcgy to dcal with its competitivc rivals to scrvc its particular basc of
cLlstomers, and to act on the changes that impact the way

it operates. Each firm nccds to

develop a competitive advantage in its strategy that enables it to compete effectivcly. Stratcgy refers to the ideas, plans, and support that forms employs to compcle suoccssfully against their rivals, Strategy is designed to help firm to gain an edge over its rivals which
generates successful performance over an extended period.

Dclinition of strategy:
Ilarvard's Alfred Chandler" Strategy is a determination of the basic long torm goals

objectives ofan action and allocation ofresources necessary for carrying ou1 these goals"

Jamcs.B.Quinn "Strategy is a pattern or plan that integrates an organization's major goals, policics. action sequences into a cohesive whole."

William Gluick" Strategy is unified comprehensive

and integrated plan dcsigncd to cnsurc

that the basic objective of the enterprise are achieved."

IIcnry Mintzberg"

Strategy represents a fundamental congruetrce between extcrnal

opporturity and internal capacity. It is a pattem in a stream of decisions and action" Fcaturcs of a Stratcgv:
Strategy is course of action through which an organization relatcs itself with thc

cnvironmcnl so as (o achieve pre-set goals.


Stratcgy Iinks thc organization to its cnvironmcnt.-Strategy relales the organization with
its environment, to judge the feasibility of new products, to set objectives etc, environment
and the

firm influence each other in a systems approach, so it is very crucial to take changing

environmental tbrces tbr the growth of the flrm.


Strategv combines l-actors like strenqth and weakness: A strategy is instrumcntal in

rclating thc organization to its cnvironment, firm's strength and wcakncss. 'l'o capitalizc on
tirc opportrmitics, it must weigh first the threats associatcd with it and thcn its strcngths and wcakncss.


has to be keen observer in each course ofaction.

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Module 1 Introduction to Strategic Management

3. 4.

Stratctry is rclativc combination of actions.: A combination reached to mcet a particular

condition or a situation to solve ccrtain problems or to attain a desirable goal.

Stratcgy is forward looking: Business situations are changing in their entire dimcnsioh
making prcscnt situation obsolete, warranting new and creative approach to solve the
problems that arises.


A stratew is comrrlex and highlv undependable for renetition. Gray Hamel has quoted the 'Ycstcrday's succcss will not guarantcc today good performance, and today's success will not
bc hclp to bc

llturc lcadcrs". Dnvironment

is highly volatile, strategies once implemcnted


n<lt bc usablc again, their bccomc cases to assessment.

Nccd/rclcvancc for Stratcw:

'['o havc rules to guide the search lor new opportunity both inside and outside the firm, 2.. 'l'o takc high quality project dccisions.


3. To dcvclop measures to judge opportunities. 4. 'l'o havc an assurance that the firm's overall resources allocation 5. 'l'o have and develop internal ability to anticipate change. 6. 'l'o save timc, money and executive talent. 7. 'l'o idcntily devclop and exploit potential opportunities. 8. Improvcd intcgration.

put,.rn is efficient.


Dcvclop field of study by research.

10. Increase the probability of better performance. I I . 'fo take system atized business decisions. 12. 'l'o improve communication and coordination in business. 13. lniproves allocation of resources.

14. I lclps the manager to have a holistic approach.

5l"s of stratcgv: Mintzberg

has developed a useful framework for understanding strategy:

X x X

l'lan: intended course of action.

Purposc: consistcnt stream of actions because of deliberate planning or emergent situations,

l'lay,: tactical play


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Module 1 Introduction to Strategic Management

x X

Position: location of thc orgairization rclative to competitors and othcr cnvironmcntal factors,
Pcrspective: personality of the organization


I= - r --.

-\ - ,I

l'orms of strategv: IIenry Mintzberg

a very

influcntial managemcnt scholar at McGill

University has identified different forms of strategy;

lntcnded strategy: It is a corporate level strategy in which organizational dccisions arc

detcrmined only by analysis, for various reasons the intended stral.egy hardly survivcs in its

original form. Unforeseen environmental developments, resource constrainls, will rcsult in

some parts of the intended strategy being unrealized.

Delibcrate strategy: strategist will want to take advantage if new opportunity prescnted by
the environment even

if it

is not the part of intended strategy, they are secondary set of plans

to support and maneuver the intentions. For eg, when government gave subsidies fbr solar powcr gcncrations, many busincss havc incrcased thcir invcstr4ent and hiring in this scctor.

Emcrgcnt strategy: the complete new strategy or changes in the cxisting stratcgy bccausc of
unlbrcseen events in the external environment can be termed as emergent strategy. l"or cg:

avoid the saturated markets in the cities for Flat TVs Toshiba concentrated to incrcasc salcs in rural markcts of India.

llealized strategy: strategy which organizational decisions are determined by both analysis
and untbreseen environmental developments.

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Module L lntroduction to Strategic Management




F"'= E ri -i- t{ Fi Cr r} E L i B E R A-f E S-i- R /a-f EG i ES

Er-l I boratStr-teg!,
I -od Ft--l Sltr-t-gtt

Lrn rcal lzecl Stratogt,

' X

Levels of Strategy: Strategy operation takes place at different levels namely. corporate.
busincss and functional levels,

(lorporate tevel strategv: decisions making machinery consists of mainly members of IIOD.


'l'hey are responsible for financial and non-financial and administrative members.

pcrlormancc ol'thc organization on thc whole.

l'hcir rolcs involvc:

a) b)

Delining the mission and goals of the organization.

Del.ennining what business it should bc in.

c) Allocating rosoutccs among differenl business areas. d) l;ormulating stratcgies that span individual business. e) I)roviding I-eadership to tl're organization.

l) !t

Oorporatc pcople are guardians o1'stock holder's welf'are

Busincss tcvct


fhcsc mangcrs arc rcsponsible to translatc thc gcncral statcmcnts ol'

*1g*1 * *

intcnt gencrated at the corporate level into solid functional obiectivcs and

strategies Ibr indivicluals business division or SBUs. These level strategies determirre tlie basis on which a lirm can compete in the selected product market filed. For eg: -l'CS, 'l'ata 'l'ata

TATA's SBUs arc



TCL etc.

'l'he role is:

a)'lb translatc gcncral

statement of direction fbr individual business.

b) Dcsign dccision on which a llrm can compete in the selected markct. C) Conccrncd with stratcgics thal is spccific to a particular busincss.

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Module L lntroduction to Strategic Management

l'unctional level stratesy: their basic responsibility lies in developing annual objectives
basically which is functional for fulfilling
departmental functioning like


short term strategies in the areas of production and operations research and developments,


corporate objectives. They also include thc


I{I{M, Operations, Marketing, finance and accounting who

rcsponsible 1br implementation or execution of company's strategic plans. 'l'hc rolcs thcy play arc: Designing functional strategy in tune with business and corporate strategy, Provide information and feedback upwards to formulate realistic and attainable stratcgics.

'l'hcy arc rcsponsiblc for strategy implementation and cxccution of corporate stratcgy.

ln shoft, corporate level strategy occupies the highest level of strategic decisions making,
which is more value oriented, conceptual. At business level, strategies are morc
comprehcnsive.related to the business portfolio, of resource allocation and coordinating

lunctional arcas in SBIJ's and at thc functional level are restricted plan accommodating
objcctivcs lbr specilic function and coordinating different operations in achicving SIStJ's and
corporatc objcctivcs.


between Corporate, Business & Functional Strategy

Il rrsirtess lc.-'el
busincss co, Corporate strategy

- -.--'-

SBu or sirrgle

Sotrrce & Motivrrtiorr/Di recrion


Boarcl of directors/

I SBU srrutegy


'l'op levcl corpora te trrBlragers

-l'op level S-LtU rnanalgers or Top level single brrsirress co.


lrunc(iorral at ttargcrs



lorizon Speciti c ity


Medirrt:r to long ternr

General statements ofoverall direction & iritcnt

Slrort to lorlll, te|rrl

/\ction &

inrplernenttr t iorr orierlt(rcl

lrlcx ibil it Cooperarion

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Irinal BIIM

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Module 1 Introduction to Strategic Management

Dcfi nition of Stratcgic Manasemcnt:

Stratcgic managemcnt is a process! directed by top management, to determine the tundamcntal aims or goals of the organization and ensure a range of decisions which will

allow lor the achievement of those aims in the long term. while providing for adoptive
rcsponscs in the shofl tcrm.

Strategic Management is defined as the set of decisions and actions resulting in forntation and

irnplcmcntation ol'strategies designed to achieve the objectives of an institutions---.lohn and

Richard. X *

SM is a complex of strategic planning and implementation of strategies. -Prof. .lohn Pearcc.

Art & science of.formtlating, irnplementing, and evaluating, cross-functional decisions that
enable un orS4anizalbn lo achieve ils obiectives (David 2005)

f'eatures of Strategic management:

X X X X x x X X

Stratcgic dccisions warrant top management support. Stratcgic issucs involvc allocation of large amount of resources.
Strategic issues have a long term impact on the firm.

'fhcy arc lirturc oricntcd.

Stratcgic issucs involvc cross-functional and multi-layered managerial pcrsonnel. Stratcgic issues gives due weight age to the firm's external environment.
Strategic ,nanagenrent is a continuous process.

Stratcgic managcment emphasizes on both efficiency and effectiveness.

lJcncfits of Stratcqic Manasement:

Tlcr-refits of strategic management can be divided in financial and non-flnancial benefits:

Strategic Management helps an organization to be pro-active in shaping future.

2. 3. 4.

SM not only helps organization to respond to the environment, but also influence its
environntent by exerting control over its destiny.

SM hclps organization to achieve understanding and commitment of all managers. SM achicvcs participativc managcmcnt.

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Module 1 Introduction to Strategic Management

5. SM leads to long-run commitment to high performance c f business. 6. sM cnhanccs problcm-prcvcntion capabilitics of thc organizalion. 7. SM allows identif-rcation, prioritization and exploration of opporturnitics. 8. SM helps to integrate the behavior of individual into total effort. 9. SM encourages favorable attitude towards change.
Modcl of stratcgic managcmcnt rrroccss:
Strategic management process is the steps, by which management converts a firm's valucs.

mission, and goals/objectives into a workable stralegy,

It consists of Eight stages:

T.dentify the Org.'s c u nnent mtssron ond

=valute resu lt

l i



'l-his plocess is most applicable to strategic management at the business turit lcvel of thc

organization. For large corporation strategy at the corporate level is more concerned with
managing a portfblio of business, involves strategy decisions about which business units to

gro\\', rcsourccs allocation among the business units, taking advantagc of syncrgics among thc
busincss units, and mergcrs and acquisitions

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Stcp: I Establishins vision. mission and goals/obicctives:
Vision statement: Is the likely status the firm wants to achieve in the long run. Vision
statcmcnt sets the mood of where the company should go.

MISSION: A company's mission is its reason for being. The mission often is expressed in the
fbrm o1'a mission statement, which conveys a sense of purpose to employees and projects a company imagc to customcrs.

'l'ask of thc Mission statement:

l. Inject sense of purpose into tlrm's purpose. 2. l)rovide long tcrm dircction.
3. 4.
Givc thc tirm an idcntity, Dccidc' who wc arc', whal wc do', & whcrc we are headcd'.
ComDoncnts of mission statcmcnt

(l )Customors: Who are the organization's customers?


Amul :

'l-ecnagers, Children

l;or Parlc-G : all age group people

(2) l)rod ucts

or scn,ices

(3)Markcts: Whcrc docs organization compete geographically?

li.(i.---Amul emphasis is on whole india.

(4)'l'cchnolosv: Oompany should update with the technology with ref'erence to the product
ancl scrvicc thcy r1ffcr

to customcr to ovcr corne the competition.

(5)Philosonhv: What arc thc organization's basic belicf,valucs,and cthical priorities? (6)Sclf conccnt: What are thc organization's major competitive advantage and core

(7)Conccrn filr Dublic imagc: How responsive is organization to societal and environmental

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Module L lntroduction to Strategic Management

(8)Conccrns for emplovee: Dose the organization consider employee a valuable asset? (9)Concern for survival erowth and nrofitabilitv

Objcctives are concrete goals that the organization seeks tn reach, lor examplc an carnings

--- rowth targct

'l'hc obiective must be achievable and challenging, and measurable so that the company can

monitor its progress and makc corrcctions 'l'ask of Obiectives:

as needcd.

Convcrt mission into perfbrmance targets.

2. Create yardsticks to track performance. 3. Establish performance goals required for the task. 4. Push firm to be inventive, intentional, and focused.
lig: Strategic objective of the firm:


lncrcascd the tirm's market share.

2. Overlake rivals on quality/customer service. 3. Attain lower overall costs. 4. Ilccomc leader in new product introduction. 5. Achicvc tcchnological supcriority
'l'his step address how organization must have clearly articulate goals and objcctivcs in ordcr to Channel the eftbrts of individuals throughout the organization towards common g<lals.
Goals and Objectives also provide a means of allocating resollrces eflbctively.

A llrm's

vision. mission, and strategic objectives form a hierarchy of goals that range from broad
statements of intent and bases tbr competitive advantage to specitic measurable strategic



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Module L lntroduction to Strategic Management


Currcnt Obiectivc: Reliance communication's current objective is to capture

markct sharc

30Yo Indian

Currcnt stratcsies: 50 paisa/min in all over India for LIFE-TIME just in Rs.48

StCN 2


Changc in cnvironmcnt oftcn prcscnts ncw opportunity; an cnvironmcnt scan is pcrformcd to

idcntity available opportunities. A firm must also know its internal strength and limitations to
pursue the opportunity lor viable success. The situation analysis involves both the external and internal scan. 'l'he environmental scan includes the following components:


Intcrnal analysis of the firm.

2. Analysis of the firm's industry (task environment) 3. Ilxtcrnal macro environment (PEST analysis)
Managers must scan and monitor the environment as well as analyze competitors. Such

inforrnatiorr is critical; in determining the opponunity and threats in the external environment.

'l'hc intcrnal analysis can identify the firm's strength and weakness and the extemal analysis

Opportunitics and threats. An indu.stry analysis can be perfbrmed using


dcvclopcd by Michacl Portcr known as Porter's Five Forces. A situation analysis can gcncratc
a largc amount of information, which can bc sclcctivc managed to crcatc a modcl of SWOI' analysis.


Positive trends in external environmental f'actors

. Ol'l'OR'ItlNI'l'IllS:. 'l'lIltllA'l'S:-

Negative trends in external envirorulental factors

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Module L lntroduction to Strategic Management

l)xample: ICICI Bank Opportunities
Rural financing and loans to small enterprises could increase the market share and

profitability of ICICI Growth in general insurance industry will help increasing the market

ol'ICICI l,ombard General Insurance Company

Opening of Indian banking sector in 2009 would cause intense competition

(ilobal and domestic economic slow down could affect financial perfbrmance of ICICI

Skills and abilities of employee Availablc rcsourccs

Financial position

Quality of it's product and services Example:- Amul

l,)very day Amul colleits 7 converts the

million litres of milk from2.6 million t'armers (many illiterate),

milk into branded, packaged products, and delivers goods to over 500,000 retail

outlets across the country Sterr 5

- ldentifv

strength and weakness

Strengths:- Any activity the organisation does well or any unique resources that it has.
Weaknesses:- Activity the organisation does not well or any resources It needs but does not

Examrlle : Pcpsi

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Module 1 Introduction to Strategic Management

. Pcpsi has a broader product line and outstanding reputation. . Increasing market share and revenues.
. Availability ol'large fiee cash flow

. .

(]rcat brands, strong distribution. innovative capabilities


l)l'epsiCo is Iar away fiorn leader Coca-cola in the international market - demand is highly


(2) t'epsi had to inspire vision and direction tbr large global company. (3)Not all I')epsiCo products bear the company name

Stcn 6: Stratesy l'ormuiation.

A finn's strategy tbrmulation is developed at several levels; first business level strategy
addrcsscs thc

issuc. Of how to compete in

a given business

to attain competitive advantage,

stratcgics arc lormulated aftcr

Probing Lhe following questions?

.,r.r-j..,1-rr ! !i.!._n !

t]l .j!{.^-f.!.jE

_ !-<-EY S'!-P,^--I-EG!C I\4.^.N.'\GE$.4E!.!!-

).1.:\ \-1.!r: r!j !!!a, !!a:!!!! l!L-!,:!:;-2 i rrt: 1.;r,::tit rr-"-..it:tttc-: rttti l>tt-sit )rr.s-s2 (jt-e etlt(?rit-r!-l :.:.,.-,-li ,,.(-i1/ i:,-ir:t-,e tit.)rs 't'"r' i : t i --- : : .::' 1.i:!-,'.' +---: -> i t'- : t t i < i vt' ) l) M s LJ.) .\ . ,, .r.r, ttJt. .l , :

c)LJr it)ClIl.sl.r\,.:'

't'hc firm must determine the best method to develop international strategies as it ventures

bcyond its national boundaries, managers must formulate effective entrepreneurial initiatives
to succccd in highly compctitivc and dynamic environment.

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Module L lntroduction to Strategic Management

Stcrl 7 -Stratcgy implementation:

Sound strategy is of no value

if they

are not properly implemented. Strategy implementation

involves ensuring proper strategic control and organizational designs, which include cstablishing effective means to coordinate and integrate activities within the tinn as well as

with its suppliers, customers, and alliance partners, Leadership plays a central rclc, including
ensuring that the organization is committed to excellence and cthical bchavior. It also promotes learning and continuous improvement and acts entrepreneurially in crcating and

taking advantage of new opporlLlnities.

Stcrr 8: Stratcgv cvaluation and control:
F'irms must cxcrcise two typcs of strategic control. First informational control rccluircs that

organizations continually monitor and scan the environment and responds to thrcats and opportunities. Second. behavioral control involves the profer balance of rewards and incentives as well as cultures and boundaries. Successlul lirms practice ell'ective corporate.
governance. 'l'hey must create mechanisms to ensure that the actions of the managers at'c consistent with the interests of the owners of the firms. These include an ef-tective board


directors, actively cngagcd shareholders and proper managcrial rcwards and inccntivc
systems, various exlernal mechanisms such as market olcorporatc control. auditors, banks. analysts, and the financial press often help to ensure good govcrnancc.

Stratesic decisi0n makinq:

Managemcnt is thc proccss of decision making.


decisions are important as onc dccisions

leads to another decision which has major or minor effecl on thc organizations. Appropriate

dccisions making


basic and fundamental for the survival and growth

o[thc llrms.

Proper anal,vsis. conceptual ability, comprehensive thinking. Iar-sightcdness- should bc somc

abilities lor stratcgic decision making; It is a major choicc of actions conccrning allocation ol'
rcsoLrrces and

contribution to the achievement of organizations objectivcs.

Attributcs of stratcgic dccision making:

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Module 1 Introduction to Strategic Management

It is fundamental,

it influences the entire or major part of the organizations.

Strategic dccisions contribute directly to the organizational goals,they have a long term



to consider various other alternatives to buffer against the volatile environment. All

thcse alternatives impact the outcome, inputs and profitability

Stratcgic dccision are Lrade-ofls between the costs and risks and time, competitive

vulnerability of thc market. Thcy arc controversial in nature


t{iculty in rcconciling stakeholdcrs' Necds.

Arrnroachcs to stratcgic dccision makinq:

Since organizations are unique in their own way, the decision making styles varies among

thcm. 'l'hc diffcrcnccs may arisc due


thc extent of formalization of decisions, movc from

Ibrmalized and structured to informal and unstructured, process, managerial power relationships ctc. Tlcnry Mintzbcrg has identified three different approaches of decisions making:

EntrcDrcncurial arrrrroach: is lollowcd by business held by families, who constantly scarch

lor opportunitics that changing environment makes available, decisions making is morc

less ccntralizcd. whcre rich experience and past sound judgrnent plays a vital role in making

the head as conrpetent authority to make decisions, they are both growth and expansions oricntcd. 'l'hc1,


the organizations adaptive to changing needs of business world.


Adarltivc annroach: this approach is rcactive rather than proactive and tries to collect

mix thc variant factors influcncing stratcgic dccisions. It is morc of problcm solving which arc
cncountered lor survival in business.' Decisions making is the hands of many people evolved

in the process. and priority based decisions are taken into considerations.

I'lanning arrnroach: strategic decisions are

rrased on socio-economic situations, purposes ol'

organizations. value of top management, external opportunities. Decision making is a

conrprehensive step of systematic and structured analysis of the enviromnent eilbctirig the


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Module L lntroduction to Stratt:gic Management

Pitfalls in strategic management: Strategic management is however


wher-r things

do not tbll in the right quadrant, even after a lot of thorough analysis, there are certain

limitations which are to be taken into account before one is concluding strategic managcmcnl
is bc always succcsslul.

o r o o

lt inllicts rigidity in the organizations:


when there is no match in strategy formulal.ion encl

Short-term focus of the organization: long terms changes will not be apprcciatcd as today
organizations lbcus in short term results,

lrvcr changing, complex and dynamic environment: l{eview process is dit}icult and time consuming activity.
Reasons fbr

lhilure of Stratesic Management: There

are many reasons why strategic plans

lail, especially:

a. Failurc to undcrstand

the customcr

. . .

Why do they buy is there a real need for the product inadequate or incorrect marketing research

Inability to prcdict cnvironmental rcaction


o . . .

will competitors do

Fighting brands Pricc wars Will government intervene

c. Ovcr-cstimation of resource competence . .

Can the staff, equipment, and processes handle the new strategy

Failure to develop new employee and management skills

cl. Failurc to coordinatc

. .

l{eporling and control relationships not adequate Organizational structure not flexible enough

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Module 1 Introduction to Strategic Management

c. l'ailurc to obtain scnior managemcnt commitment . . f.' . .

l;ailure to gct rranagement involved right from the start l;ailurc to obtain suflicient company resources to accomplish task
tr'ailure to obtain cmploycc commitmcnt

Ncw stratcgy not wcll cxplained to employees No inccntivcs givcn to workers to embrace th,e new strategy [Jnder-estimation of time requirements No critical path analysis done

h. F'ailurc to follow thc plan

. . .

No lbllow tlrrough after initial planning No tracking of progress against plan No consequences lbr above

i. l'ailurt to managc changc


.. j. . .

Inadequate understanding

ofthe internal resistance to change

[,ack of vision on thc rclationships between processes, technology and organization

Insufficicnt information sharing among stakeholders ljxclusion ol stakeholders and delegates

Who arc Stratcgic-Managcrs?

'l'hr:rc are two kinds of scnior managers most dircctly responsible for stratcgy: Busincss managcrs and corporatc managcrs. Busincss managcrs are in chargc of individual busincss. In

diversified. multi business firms, the executives in charge of individual business (electronic,
semiconductors. serves) are business managers, these executives go by many designations like gcncral manager, division manager! strategic business manager.

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Module 1 Introduction to Strategic Management

Corporale managers are responsible for portfolios of business, In multi-busincss firm thc

prcsidcnt or chairperson, are corporate manager, they oversee the surbset of the lirm's total

portfblio of business.

Iloth these business and corporate managers play pivotal roles in the strategic managcmcnt
process, they are key people who bring all other assets into play when competing

with othcr

lirms.'lhe1, s1to represent the highest level of authority within the tirm or subunit, As a result,
thcy cxcrt enormous influence over the company's capital expenditure to build new plants ore to accluirc othor companies, chart thc future direction of thc firm's growth and dircct thc

firm's cfforts towards cmcrging market opportunities. I'op managcrs oftcn scrvc as thc
spokespersons for their firms when dealing with the media over such issues as brcakthrough technologies, new products rollouts, or potential allegations against the company by shareholders, customers or communities. Thus top managers perfbrm mr"rltiple lasks at thc highest level of an organization and bear the highest responsibility for their
and actions.

firm's strategies

At the same time, customers, investors, employees and even the public at large depend on thc
judgement, experience and skills of these managers to compete both tairly and within the law.
Iror thc vast majority of compeuries in India, senior managers continue t<l work long hours

lbrmulating stratcgics and action plans that aim to satisfy thcir customcrs, rcwards thcir
invcstors, develop thcir employees, and foster a largc sensc of public trust. I-Iowcvcr busincss
is not immune from scandalous activities that can mar the reputation of entire industries for an extended period.

'I'hc slratcgic managcrs include: lloard ofdirectors.

Chiel' executive officerimanaging director. Entrepreneur. StlLJ lcvcl managcrs. Senior managers.

Middlc-lcvcl managers.

vcl managcr

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Module L lntroduction to Strategic Management

Rolcs of stratcgic managcr

a. Intcrrrcrsonal


. . .

l;igurc I Icad.



Informational llole:

. M<lnitor. . Disscminator. o Spokcsman. c. l)ccisionalllole.s: r Disturbanccllandlcr,

Resources Allocator.

. o


Stratcsic Manascmcnt Rcsrronsibilitics:

X x x x !t x

llstablishinq thc Mission: 'l'he strategist decides on the business engagement and guidanc<:
for continuous growth. A mission is usually enduring and timeless.

l'ormulating a Companv Philosophv: Establishing the beliefs, values, attitudes

unwlitten guide lines.


Scttins Obicctives: deciding on achievement targets within a deflned time range,

Obicctivcs hclp in making operational plans for carrying out strategy.

l)cvclopins stratdsv: dcvcloping concepts, ideas and plans for achieving objectivcs
successfully and meeting and beating competition.

Plannins thc orsanizational structurc: developing the plan of the organization and thc
activities that help people work to perform activities in accordance.

.: organrzatton.

l'rovidins I'ersonncl: recruiting. selection and developing

people to


the positions in the

f"; P;l;;;






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Module 1 Introduction to Stratesic Manasement

X x X

Establishing Proccdures and facilities: Providing plant, equipment. Determining

prescribing how all the activities are carried out.


l'roviding carrital: making sure the business has the money, and credit needcd fbr working
capital and physical facilities.

llstablishing Management programme and operational olans: Developing programmes,

and plans govcrning activitics and thc use of resources that carricd out in accordancc with

cstablishcd stratcgy, policies, procedures and standards


enablc pcoplc to aohiovc

particular objective.

Providinq control inlbrmation: providing tbcts and tigures to help people fbllow slrategy,
policies, procedures and programme to keep alert fbr the workfbrce. It also measures ovorall
company performance against plans and standards.

Activatins peorrle: Commanding and motivating people to act in accordancc with

philosophy, policies, procedures and standards in carrying out the Plans of the company.

Conclusion: An organization strategy must be appropriate for its resources, environment, circumstanccs
and core objectives. The process involves matching the company's stratcgic advantagc to business environment the organization faces.

Onc objcctive of overall corporate stage is to put the organization into a position to carry out its mission elfectively and elliciently.

A good corporate stratcgy should intcgral.c thc

organizational goals, policies and action sequence (tactics) into a cohcsivs wholc, and must bc
based on business realities. Business enterprise may

fail despite excellent stratcgy bccausc


world changes in a way they fail to understand. Strategy must connect with vision. Pulposc

likely luture trends.

l'hilips Elcctronics is one of the world's biggest producers of medical equiprncnt, consumcr
electronics, semi-conductors, f-lat screen technologies. and home appliances. A liuropcan company rvith a very product tradition of innovation, Philips has consislentll, Ied thc rvorld in

dcvcloping rnany important technologies. F-or example. it helpeu pionecr mcdical X-ra,r, tcchnologl,, thc audio-casscttc, thc clcctric shavcr, and today currcnt compact discs Strictly for Private Circulation )U

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Module L lntroduction to Strategic Management

tcchnology. Yct tbr all its crcativc l'lair in the labs, I'hilips has struggled to compete with the

likcs ol'Matsushita, Sony and Samsung in the marketplace.

A big lactor bchind Philip' outstanding record of innovation is that the company has long
oncouragcd scicntific rcscarch and big projects that yield potentially big payoffs. Whilc cr.rltivating innovations, Philips has traditionally marketcd its products in different parts of thc

world separately. Although Philips originated in the Netherlands. the company has historically
looked to larger nrarkets in the US. l,atin America. Asia and the rest of Europe for much of its

growth. Philips was one of the first companies to fbrmulate and implement a worldwide
stratcgy that witncsscd thc steady growth and profitability of local operations, Many


t'hilips innovations ovcr timc camc fiom large labs located throughout the US, Lurope.
Australia arrd Canada. Over time, Philips relied heavily on its regional affiliated to
manulacLuro many

ol'its lcading-cdgc products for

sale in national and morc local markets.


'l'hc innovation drivcn strategy worked fbr Philips for many decades. Japanese rivals such

Matsushita Fllcctric. Sony. JVC. and Toshiba began producing consumer clcctronics and othcr high tcchnology products at lower unit costs. Unlike Philips, .lapanese firms were able to construct largc factories that were ultra effici,ent. They were able to overlake Philips' markct

position in many markets. Philips also faced competition, and difficulties building up a wellrccognized brand namc r.r,ith global reach.

l'hilips atternpted to restructure its operations to compete more effectively with these rivals
ovcr the past two dccadcs, lts current CF,O Gerard Kleisterlee is overseeing a major rcorganizations of l'hilips that sccks to combine disparate operations and organizational practiccs into a cohcsivc systcm. Klcistcrlcc wants Phillips traditionally scparatc busincss units to communicatc and to coordinate their activities to achieve significant cost savings and to deliver leading edge products to market faster. At the same time. the company has decided to allocate more resources to high growth opportunities in its core medical, electronics, and

flat scrccn busincss.

In addition, Philips has fbrmed a wide array of technologies sharing relation ships with
companics throughout the tJS and Far llast. With LG group Philips formed a separate

company known as LG I'}hilips of LCD screens that are found in flat screen TVs and Cell Strictly for l)rivatc Circulation
Lakshman Final BBM

l'1agc 27

Module L lntroduction to Stra

c Management

phones and digital cameras. Philips teamed with Chinese maker of rnedical equipment known
as Neusoft,


produce medical imaging equipment tbr use in china. In the liled of advanced

integrated circuits, Philips joined with'l'aiwan Semiconductor company to co design and co-

producc lcading cdgc chips that will power next generation applicants and consumcr elcctronics. It is also working with Samsung Electronic to creatc "elcctronic wallct", it has
also an ambition to be an important supplier of new digital technologies for luture homc entertarnment centers.

Philips stratcgic transition is designed

1o compele

more effeclively in an increasingly

connected global marketplace. However the process of chaining Philips organizational practices represents a long term ongoing eftbrt that has already helped the company becomc rnorc profitable and faster moving,

Strategy is a powerful concept designed to help firm gain a cornpetitive advantage over rivals.

It involves two key choices, the customers

strcngths it

firm will serve and the competences and


will develop to serve customers effbctively.

A firm's choiccs must rcflcct its strcngth and weakness rclativc to rivals and thc opportunitics
and thrcats prcscntcd by its cxternal cnvironment. Analysis of thcsc four clcmcnts is rcl'crccd as SWOT analysis.

All lirms

must deal w'ith the strategic imperatives facing them according to thcir own

nclividual situations. 'l'he management process designed to satisfy strategic imperatives fbr building compctitivc
advantage is called strategic management process. It consists o1 lbur rnajor stcps: analysis,

lbrmulation, implementation, and evaluation.

Bccausc stratcgic choiccs involvc large financcs, havc long tcrm impact on an organization
and generate considerable controversy among organizational mcmbcrs, top and scnior

lranagcrs gcnerally play a prirnary role in determining such dccisions. lixecutives most directly responsible tbr strategic decisions are business managers and
corporate managers.

A business manager is in charge of an entirc business and corporalc

managcrs, ovcrsces a portfblio of busincss.

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Pagc 22

Module 1 Introduction to Strategic Management

Important Questions:


Dcfinc Strategic management? Discuss its importance and relevance in today's volatile
cnvironmcnt? Who is a stratcgist? What thc rolc and responsibilities he plays? What is strategic management process? Explain in detail the steps involved? What is strategic decision making? What is the importance of decision making? What arc rcasons lor stratcgic dccision failure? Give relevant examples.

a a

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