1. Write a short the historical background of strategic management.

STRATEGIC MANAGEMENT-History and Development

Until the 1940s, strategy was seen as primarily a matter for the military.
Military history is filled with stories about strategy. Almost from the
beginning of recorded time, leaders contemplating battle have devised
offensive and counter-offensive moves for the purpose of defeating an
enemy. The word strategy derives from the Greek for generalship, strategia,
and entered the English vocabulary in 1688 as strategie..

Over the years, the practice of strategy has evolved through five phases
(each phase generally involved the perceived failure of the previous phase):

1. Basic Financial Planning (Budgeting)

2. Long-range Planning (Extrapolation)
3. Strategic (Externally Oriented) Planning
4. Strategic Management
5. Complex Systems Strategy:
a. Complex Static Systems or Emergence
b. Complex Dynamic Systems or Strategic Balance
 

Basic Financial Planning (Budgeting)

James McKinsey (1889-1937), founder of the global management

consultancy that bears his name, was a professor of cost accounting at
the school of business at the University of Chicago. His most important
publication, Budgetary Control (1922), is quoted as the start of the era
of modern budgetary accounting.

Early efforts in corporate strategy were generally limited to the

development of a budget, with managers realizing that there was a
need to plan the allocation of funds. Later, in the first half of the
1900s, business managers expanded the budgeting process into the
future. Budgeting and strategic changes (such as entering a new

1
market) were synthesized into the extended budgeting process, so
that the budget supported the strategic objectives of the firm. With the
exception of the Great Depression, the competitive environment at this
time was fairly stable and predictable.

Long-range Planning  (Extrapolation)

Long-range Planning was simply an extension of one year financial

planning into five-year budgets and detailed operating plans. It
involved little or no consideration of social or political factors,
assuming that markets would be relatively stable. Gradually, it
developed to encompass issues of growth and diversification.

In the 1960s, George Steiner did much to focus business manager’s

attention on strategic planning, bringing the issue of long-range
planning to the forefront. Managerial Long-Range Planning, edited by
Steiner focused upon the issue of corporate long-range planning. He
gathered information about how different companies were using long-
range plans in order to allocate resources and to plan for growth and
diversification.

A number of other linear approaches also developed in the same time

period, including “game theory”. Another development was “operations
research”, an approach that focused upon the manipulation of models
containing multiple variables. Both have made a contribution to the
field of strategy.

2
Strategic (Externally Oriented) Planning

Strategic (Externally Oriented) Planning aimed to ensure that

managers engaged in debate about strategic options before the budget
was drawn up. Here the focus of strategy was in the business units
(business strategy) rather than in the organization centre. The concept
of business strategy started out as ‘business policy’, a term still in
widespread use at business schools today. The word policy implies a
‘hands-off’, administrative, even intellectual approach rather than the
implementation-focused approach that characterizes much of modern
thinking on strategy. In the mid-1900s, business managers realized
that external events were playing an increasingly important role in
determining corporate performance. As a result, they began to look
externally for significant drivers, such as economic forces, so that they
could try to plan for discontinuities. This approach continued to find
favor well into the 1970s.

While the theorists were arguing, one large US Company was quietly
innovating. General Electric Co. (GE) had begun to develop the
concept of strategic business units (SBUs) in the 1950s. The basic
idea-now largely accepted as the normal and obvious way of going
about things-was that strategy should be set within the context of
individual businesses which had clearly defined products and markets.
Each of these businesses would be responsible for its own profits and
development, under general guidance from headquarters.

The evolution of strategy began in the early 1960s, when a flurry of

authoritative texts suddenly turned strategic planning from an issue of
vague academic interest into an important concern for practicing
managers. Prior to this strategy wasn’t part of the normal executive

3
vocabulary.

Alfred Chandler (1918-) – Influential figure in both strategy and

business structure-Strauss Professor of Business History at Harvard
since 1971.

Chandler talks about the development of the management of a large

company from history; in particular from the mid nineteenth century
to the end of the First World War (what he calls ‘the formative years of
modern capitalism’). During this period, the typical entrepreneurial or
family firm gave way to larger organizations containing multiple units.
A new form of management was needed because the owner-manager
could not be everywhere at once. In addition, a new breed of manager
was needed to operate in this environment – the salaried professional.

John Gardner’s Self-Renewal, published in 1964, which pointed out

that organizations constantly need to reassess themselves, had the
earliest real impact on managers. Like people, they need to keep
renewing their skills and abilities – something they can only do
effectively through careful planning.

Kirby Warren at Harvard looked in depth at what happened in a small

number of companies to see what worked well and what didn’t. In
several companies for example, he found that the managers confused
the strategic plan with its components – in particular, the marketing
plan was often assumed to be the same thing as the overall corporate
plan.

4
Wickham Skinner (1924-) who was based at Harvard since 1960,
pointed out that an excessive focus on marketing Planning frequently
led companies to forget about manufacturing needs until late in the
day, when there was little room for manoeuvre. Skinner argued for a
clear manufacturing strategy to proceed in parallel with the marketing
strategy. where a certain error rate in production was compensated for
by higher volume sales at a lower price, was incompatible with
producing 100 per cent perfect product for the military. The most likely
outcome was a compromise that satisfies no one.

Paul Lawrence and Jay Lorsch, also from Harvard, put forth their
contingency theory of organizations. They argued that every
organization is composed of multiple paradoxes. On the one hand,
each department or unit has its own objectives and environment. It
responds to those in its own way, both in terms of how it is structured,
the time horizons people assume, the formality or informality of how it
goes about its tasks and so on. All these factors contribute towards
what they call ‘differentiation’. At the same time each unit needs to
work with others in pursuit of common goals. That requires a certain
amount of ‘integration’, to ensure that they are all working with rather
than against each other. In their studies of US firms in a variety of
manufacturing industries, they found that companies with a high level
of differentiation could also have a high level of integration. The
reason was simple; the greater the differentiation, the more potential
for conflict between departments and therefore the greater the need
for mechanisms to help them work together. Their work forced many
managers to understand that organizations were not fixed; that
strategy and planning had to be adapted to each segment of the
environment with which they dealt.

5
 Igor Ansoff (1918-) through his unstintingly serious, analytical and
complex, Corporate Strategy, published in 1965, had a highly
significant impact on the business world. It propelled consideration of
strategy into a new dimension. It was Ansoff who introduced the term
strategic management into the business vocabulary.

Reinforced by his conviction that strategy was a valid, if incomplete,

concept, Ansoff followed up Corporate Strategy with Strategic
Management (1979) and Implanting Strategic Management (1984).
His other books include Business Strategy (1969), Acquisition Behavior
in the US Manufacturing Industry, 1948-1965 (1971), From Strategic
Planning to Strategic Management (1974), and The New Corporate
Strategy (1988).

Implanting Strategic Management, co-written with Edward McDonnell,

records much of the research conducted by Ansoff and his associates
and reveals a number of ingenious aspects of the Ansoff model. These
include his approach to using incremental implementation for
managing resistance to change, product portfolio analysis, and issue
management systems.

2. Compare and contrast business strategy and military strategy

 Business strategy ‘
 ‘Attack Weakness’ strategy
 Bringing change to failing company military strategy
 Concentration of force
 Forging a strategic alliance„
 Patience and time
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  Control the choke-point

3. Provide at least 5 definition of SM by different author

James McKinsey (1889-1937), founder of the global management consultancy that bears
his name, was a professor of cost accounting at the school of business at the University of
Chicago. His most important publication, Budgetary Control (1922), is quoted as the start
of the era of modern budgetary accounting.

Early efforts in corporate strategy were generally limited to the development of a budget,
with managers realizing that there was a need to plan the allocation of funds. Later, in the
first half of the 1900s, business managers expanded the budgeting process into the future.
Budgeting and strategic changes (such as entering a new market) were synthesized into
the extended budgeting process, so that the budget supported the strategic objectives of
the firm. With the exception of the Great Depression, the competitive environment at this
time was fairly stable and predictable.

In the 1960s, George Steiner did much to focus business manager’s attention on strategic

planning, bringing the issue of long-range planning to the forefront. Managerial Long-
Range Planning, edited by Steiner focused upon the issue of corporate long-range
planning. He gathered information about how different companies were using long-range
plans in order to allocate resources and to plan for growth and diversification.

A number of other linear approaches also developed in the same time period, including
“game theory”. Another development was “operations research”, an approach that
focused upon the manipulation of models containing multiple variables. Both have made
a contribution to the field of strategy.

Strategic (Externally Oriented) Planning

Strategic (Externally Oriented) Planning aimed to ensure that managers engaged in

7
debate about strategic options before the budget was drawn up. Here the focus of strategy
was in the business units (business strategy) rather than in the organization centre. The
concept of business strategy started out as ‘business policy’, a term still in widespread
use at business schools today. The word policy implies a ‘hands-off’, administrative,
even intellectual approach rather than the implementation-focused approach that
characterizes much of modern thinking on strategy. In the mid-1900s, business managers
realized that external events were playing an increasingly important role in determining
corporate performance. As a result, they began to look externally for significant drivers,
such as economic forces, so that they could try to plan for discontinuities. This approach
continued to find favor well into the 1970s.

While the theorists were arguing, one large US Company was quietly innovating. General
Electric Co. (GE) had begun to develop the concept of strategic business units (SBUs) in
the 1950s. The basic idea-now largely accepted as the normal and obvious way of going
about things-was that strategy should be set within the context of individual businesses
which had clearly defined products and markets. Each of these businesses would be
responsible for its own profits and development, under general guidance from
headquarters.

The evolution of strategy began in the early 1960s, when a flurry of authoritative texts
suddenly turned strategic planning from an issue of vague academic interest into an
important concern for practicing managers. Prior to this strategy wasn’t part of the
normal executive vocabulary.

Alfred Chandler (1918-) – Influential figure in both strategy and business structure-
Strauss Professor of Business History at Harvard since 1971.

Chandler talks about the development of the management of a large company from
history; in particular from the mid nineteenth century to the end of the First World War
(what he calls ‘the formative years of modern capitalism’). During this period, the typical
entrepreneurial or family firm gave way to larger organizations containing multiple units.
A new form of management was needed because the owner-manager could not be

8
everywhere at once. In addition, a new breed of manager was needed to operate in this
environment – the salaried professional.

John Gardner’s Self-Renewal, published in 1964, which pointed out that organizations

constantly need to reassess themselves, had the earliest real impact on managers. Like
people, they need to keep renewing their skills and abilities – something they can only do
effectively through careful planning.

Kirby Warren at Harvard looked in depth at what happened in a small number of

companies to see what worked well and what didn’t. In several companies for example,
he found that the managers confused the strategic plan with its components – in
particular, the marketing plan was often assumed to be the same thing as the overall
corporate plan.

Wickham Skinner (1924-) who was based at Harvard since 1960, pointed out that an
excessive focus on marketing Planning frequently led companies to forget about
manufacturing needs until late in the day, when there was little room for manoeuvre.
Skinner argued for a clear manufacturing strategy to proceed in parallel with the
marketing strategy. where a certain error rate in production was compensated for by
higher volume sales at a lower price, was incompatible with producing 100 per cent
perfect product for the military. The most likely outcome was a compromise that satisfies
no one.

Paul Lawrence and Jay Lorsch, also from Harvard, put forth their contingency theory of
organizations. They argued that every organization is composed of multiple paradoxes.
On the one hand, each department or unit has its own objectives and environment. It
responds to those in its own way, both in terms of how it is structured, the time horizons
people assume, the formality or informality of how it goes about its tasks and so on. All
these factors contribute towards.

Igor Ansoff (1918-) through his unstintingly serious, analytical and complex, Corporate

Strategy, published in 1965, had a highly significant impact on the business world. It
propelled consideration of strategy into a new dimension. It was Ansoff who introduced

9
 the term strategic management into the business vocabulary.
Reinforced by his conviction that strategy was a valid, if incomplete, concept, Ansoff
followed up Corporate Strategy with Strategic Management (1979) and Implanting
Strategic Management (1984). His other books include Business
Strategy (1969), Acquisition Behavior in the US Manufacturing Industry, 1948-
1965 (1971), From Strategic Planning to Strategic Management  (1974), and The New
Corporate Strategy (1988).
Implanting Strategic Management, co-written with Edward McDonnell, records much of
the research conducted by Ansoff and his associates and reveals a number of ingenious
aspects of the Ansoff model.
4. 4. List out different environmental factors for new entrepreneur who wants to start
a new IT project in the technology park .
 The problems of frequent job changes by present youth.
 Retention
 The absence of an airport and
 availability of uninterrupted round the clock power supply were major hurdles towards the development of
the park.
 world-class telecommunication facilities in the area.

5. Explain the following evaluation concepts

A. The nature of strategy evaluation
The strategic-management process results in decisions that can have significant, longlasting consequences.
Erroneous strategic decisions can inflict severe penalties and can be
exceedingly difficult, if not impossible, to reverse. Most strategists agree, therefore, that
strategy evaluation is vital to an organization’s well-being; timely evaluations can alert
management to problems or potential problems before a situation becomes critical.
Strategy evaluation includes three basic activities: (1) examining the underlying bases of a
firm’s strategy, (2) comparing expected results with actual results, and (3) taking corrective
actions to ensure that performance conforms to plans.

B. Criteria for evaluating strategies

10
Consistency
A strategy should not present inconsistent goals and policies. Organizational conflict and
interdepartmental bickering are often symptoms of managerial disorder, but these problems may also be a
sign of strategic inconsistency. Three guidelines help determine if organizational problems are due to
inconsistencies in strategy:


• If managerial problems continue despite changes in personnel and if they tend to be issue-based
rather than people-based, then strategies may be inconsistent.

• If success for one organizational department means, or is interpreted to mean, failure for another
department, then strategies may be inconsistent.

• If policy problems and issues continue to be brought to the top for resolution, then strategies
may be in consistent.

Consonance
Consonance refers to the need for strategists to examine sets of trends, as well as individual trends, in
evaluating strategies. A strategy must represent an adaptive response to the external environment and tohe
critical changes occurring within it.

Feasibility
A strategy must neither overtax available resources nor create unsolvable sub problems. The final broad
test of strategy is its feasibility; that is, can the strategy be attempted within the physical, human, and
financial resources of the enterprise? The financial resources of a business are the easiest to quantify and
are normally the first limitation against which strategy is evaluated. It is sometimes forgotten, however,
that innovative approaches to financing are often possible. Devices, such as captive subsidiaries, sale-
leaseback arrangements, and tying plant mortgages to long-term contracts, have all been used effectively
to help win key positions in suddenly expanding industries. A less quantifiable, but actually more rigid,
limitation on strategic choice is that imposed by individual and organizational capabilities. In evaluating a
strategy, it is important to examine whether an organization has demonstrated in the past that it possesses
the abilities, competencies, skills, and talents needed to carry out a given strategy.
Advantage
A strategy must provide for the creation and/or maintenance of a competitive advantage in a selected area
of activity. Competitive advantages normally are the result of superiority in one of three areas: (1)
resources, (2) skills, or (3) position. The idea that the positioning of one’s resources can enhance their
combined effectiveness is familiar to military theorists, chess players, and diplomats.

C. The process of evaluating strategy

11
The decision involves the following four steps –

 focusing on few alternatives,

 considering the selection factors, 
 evaluating the alternatives against these criteria and

 making the actual choice

D. A strategy evaluation frame work

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 E. Auditing

Auditing is defined by the American Accounting Association (AAA) as “a systematic process of objectively
obtaining and evaluating evidence regarding assertions about economic actions and events to
ascertain the degree of correspondence between these assertions and established criteria,
and communicating the results to interested users.”

F. What is competitive environment

Competition in virtually all industries can be described as intense—and sometimes as

cutthroat. The essence of strategy formulation is coping with competition. Intense competition is neither
a coincidence nor bad luck. All organizations have competition. Multinationals and large
organizations clash directly on every level of product and service. The benefit of competition are also enjoyed
by the society and the markets in which
organisations operate. The customers are able to get products at lower costs and better
quality. They get better value of their money because of competition.
The nature and extent of competition that a business is facing in the market is one of the

13
major factors affecting the rate of growth, income distribution and consumer welfare.
Businesses have to consider competitors’ strategies, profits levels, costs, products and
services when preparing and implementing their business plans

G. Contingency planning

Contingency plans can be defined as alternative plans that can be put into effect if
certain key events do not occur as expected. Only high-priority areas require the insurance
of contingency plans. Strategists cannot and should not try to cover all bases by planning
for all possible contingencies. But in any case, contingency plans should be as simple as
possible

H. Characteristics of an effective evaluation systems

Strategy evaluation must meet several basic requirements to be effective.
 First, strategy evaluation activities must be economical;
 Strategy-evaluation activities also should be meaningful;
 Strategy-evaluation activities should provide timely information;
 Strategy evaluation should be designed to provide a true picture of what is happening. For
 Strategy evaluations should be simple, not too cumbersome, and not too restrictive.

6. What is demographic environment of business

7. Write a short note on microenvironment

Micro Environment. Definition: Micro Environment, refers to the environment comprising of all
the actors of an organization's immediate environment which influences the performance of the
company, as they have a direct bearing on the firm's regular business operations

14
 8. What do micro and macro environment mean?
Micro environment is defined as the nearby environment, under which the firm
operates. Macro environment refers to the general environment, that can affect the working of
all business enterprises. Elements. COSMIC, i.e. Competitors, Organization itself, Suppliers,
Market, Intermediaries and Customers

9. Discuss the relation between organization and their external

environment?

Changes in external forces translate into changes in consumer demand for both industrial and consumer
products and services. External forces affect the types of products developed, the nature of positioning
and
market segmentation strategies, the types of services offered, and the choice of businesses to acquire or
sell.
External forces directly affect both suppliers and distributors. Identifying and evaluating external
opportunities and threats enables organizations to develop a clear mission, to design strategies to achieve
long-term objectives, and to develop policies to achieve annual objectives.

10.List and explain benefits of strategic management

 It allows for identification, prioritization, and exploitation of opportunities.

 It provides an objective view of management problems.

15
  It represents a framework for improved coordination and control of activities.

 It minimizes the effects of adverse conditions and changes.

 It allows major decisions to better support established objectives.

 It allows more effective allocation of time and resources to identified opportunities.

 It allows fewer resources and less time to be devoted to correcting erroneous

or ad hoc decisions.

 It creates a framework for internal communication among personnel.

 . It helps integrate the behavior of individuals into a total effort.

 It provides a basis for clarifying individual responsibilities.

 It encourages forward thinking.

 It provides a cooperative, integrated, and enthusiastic approach to tackling problems

and opportunities.

 . It encourages a favorable attitude toward change.

 It gives a degree of discipline and formality to the management of a business

11.In strategic management it is believed that change comes through

implementation and evaluation but not formulation of strategy .why?

Because it is always more difficult to do something (strategy implementation) than to say you are
going to do it (strategy formulation)! Although inextricably linked, strategy implementation is
fundamentally different from strategy formulation.

12.Prepare three known mission statement and show whether they include
the nine components in the sample table below

Pepsi company mission

We aspire to make PepsiCo the world’s (3) premier consumer products company, focused on convenient
foods and beverages (2). We seek to produce healthy financial rewards for investors (5) as we provide
opportunities for growth and enrichment to our employees (9), our business partners and the communities
(8) in which we operate. And in everything we do, we strive to act with honesty, openness, fairness and
integrity

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