Parameswaran Balasubramanian

Assistant Professor,
STRATEGIC MANAGEMENT UNIT 1 MBA Department,
BNM IT
WHAT IS STRATEGY?
Strategy is a plan of action by which a firm can achieve competitive advantage and superior
performance.
Strategies are the means by which long-term objectives will be achieved. Its about making
choices and trade-offs.
Business strategies may include geographic expansion, diversification, acquisition, product
development, market penetration, retrenchment, divestiture, liquidation and joint ventures.
Strategies are potential actions that require top management decisions and large amount of
the firm’s resources.
Strategies affect an organization’s long-term prosperity ( at least 5 years), and thus are future
oriented.
It is not tactics or operations
WHAT IS STRATEGIC MANAGEMENT
It is the art and science of formulating, implementing and evaluating cross-functional
decisions that enable an organization to achieve its objectives.
It focuses on integrating various functions or departments like management,
marketing, finance & accounting,, production & operations, R&D, and information
systems to achieve organizational success.
An equivalent term Strategic Planning is also used, in the business world. Academia
however uses the term Strategic Management.
Strategic-management process consists of 3 stages –
 Strategy Formulation
 Strategy Implementation
 Strategy Evaluation
STRATEGY FORMULATION
Strategy formulation includes –
 Developing a vision and mission
 Identifying a firm’s external opportunities and threats
 Determining internal strengths and weaknesses
 Establishing long-term objectives
 Generating alternative strategies
 Choosing particular strategies to pursue
 Decision of what new businesses to enter, what businesses to abandon/diversify
 Decision to enter international markets
 Whether to Merge or form Joint Venture
 How to avoid hostile takeover
STRATEGY IMPLEMENTATION
Strategy implementation requires a firm to
 Establish annual objectives
 Devise policies
 Motivate employees
 Allocate resources for implementing the chosen strategies
 Develop a strategy-supportive culture
 Create appropriate organizational structure
 Direct marketing efforts
 Prepare budgets
 Develop and use information systems
 Link employee compensation to organization performance
STRATEGY EVALUATION
Strategy evaluation is the final stage in strategic management.
It is the primary means for the managers to know if particular strategies are working
well or not.
Three fundamental strategy evaluation activities are
1. Reviewing external and internal factors that are the bases for current strategies
2. Measuring performance
3. Taking corrective actions

Strategy evaluation is important as success today is no guarantee of success tomorrow.

Strategy formulation, implementation and evaluation occurs at 3 levels of organization like corporate,
divisional or strategic business unit, and functional levels (for large organizations).
STRATEGIC MANAGEMENT MODEL/PROCESS
Business Ethics/Social Responsibility/Environmental Sustainability issues

Global / International issues

BUSINESS MODEL VS STRATEGY
A company’s strategy is its action plan for outperforming its competitors and achieving
superior profitability.
A business model is at the centre of a company’s strategy, it sets forth the logic for
how its strategy will create value for its customers, at the same time, generate
revenues and realize a profit.
A business model is management’s blueprint for delivering a valuable product or
service to customers in a manner that will generate revenues sufficient to recover costs
and thereby yielding an attractive profit.
It is composed of 2 key elements. They are
1. Its customer value proposition
2. Its profit formula
BUSINESS MODEL – STRATEGY RELATIONSHIP

Business Model

Competitive
Advantage
and Superior
Profitability
Distinctive
competencies Strategies
BUSINESS MODEL
The customer value proposition is the company’s approach to satisfying buyer needs
and wants, at some price customers will consider a good value.
Put simply, from a customer perspective, the greater the value delivered (V) and the
lower the price (P), the more attractive is the company’s value proposition.
The profit formula describes the company’s approach to determining a cost structure
that will allow for acceptable profits, given the pricing tied to its customer value
proposition.
Therefore, the profit formula reveals how efficiently a company can meet customer
needs and wants and deliver on the value proposition.
The lower the costs (C), given the customer value proposition (V-P), the greater the
ability of the business model to be a money-maker.
BUSINESS MODEL
The major issue surrounding a company’s business model is whether it can execute its
value proposition profitably.
Just because company managers have crafted a strategy for competing and running
the business, this does not mean that the strategy will lead to profitability. It may be
or may not be.
For example, Gillette’s business model in razor blades involves selling a “master
product”, the razor, at an attractively low prize and then making money on repeat
purchases of razor blades that can be produced very cheaply and sold at high profit
margins.