Strategic Management

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 What is Strategy?
• Strategy is the creation of a unique &
valuable position, involving a different set
of activities.
– It’s all about winning
– Being the best
– Creating an edge
– For a long sustainable time
• If there were only one ideal position, there
would be no need for strategy.
Geetika, MNNIT
 Strategic Management
• Company should ask three questions:
– Where is the organisation now?
– Where it will be in two/five/ten years from now
if no changes were made?
– Are the answers acceptable?
If ‘NO’…….
– What actions should be taken?
– What are the payoffs and risks?

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 Strategic Management
• Set of managerial decisions and actions
that determine long term performance of
corporations
• Emphasizes monitoring and evaluating
environmental opportunities and threats in
the light of own strengths and weaknesses
• Key to success: not merely adapt to
change but create change
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 Aspects of Strategic Management
• Strategic Intents
• Strategic Decision makers
• Strategic Analysis of Environment
• Strategy Formulation
• Strategy Implementation
• Strategic Evaluation and Control

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 Strategic Intents
Integrative One

Vision

Nu
mb
er
Mission & Values
e
tur
Na

Objectives and Goals

Specific Many

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 Vision
• Refers to inspirational picture of future
• Reflects Unchanging core values
• It is Huge and audacious but achievable end
• It is durable and long-term
Basic features
• Clarity
• Brevity
• Reachability

Shared vision: shared sense of purpose

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 Mission
• It is an Explanation of vision, values, beliefs and philosophy
• It shows the Fundamental reason for existence of the
company
• Mission provides a Reference point
• It has Educative value
• It is the Motivating force

Basic components:
• customers, product, market, technology, concern for growth,
employees, public image

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 Mission
• Unlike vision statement mission statement
may undergo changes
• The entrepreneurial challenge lies in
knowing when to modify the mission
statement
– To avoid stagnation
– To trap opportunities

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 Objectives and Goals
• Objectives and goals are what an organisation
aims for and tries to achieve
– Results the organisation wants to achieve
– Towards which the behaviour is directed.
• Characteristics:
– Form a hierarchy: over the levels
– Form a network: interdependent and interlocking
– Multiplicity: many objectives coexist at the same time

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 Hierarchy of Objectives

Strategic Objectives Corporate Strategic Measures

Business Process Business Process

Objectives Strategic Business Units Measures

Individual Departments/individual managers KRAs & Performance

Objectives Measures

Performance
Appraisal
Rewards &
Consequences

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 Objectives
• Strategic Objectives
– Corporate objectives
– Evolve directly from mission statement
– Long term
– Benchmark for judging performance
• Business Process Objectives
– Functional objectives: financial, marketing, product/ sales,
operations, HR
• Individual Objectives
– Operational objectives
– Normally short term objectives with a time horizon of 1-2 years
– Key Result Areas (KRA)

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Strategic Model of Decision Making
• Evaluation of current performance
– Mission, objectives, policies, profitability
• Review of Strategic Managers
– Board of directors
– Top management
• Environment Scanning
– External/internal
– Select strategic factors
• Analyse strategic factors in light of current situation
• Generate alternatives

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 Characteristics of Strategic
Decisions

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 Strategic Decision Makers

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 Board of Directors
Characteristics

Board is largely a reflection of top management

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 Board of Directors
• Responsibilities of Board of Directors
– Setting corporate strategy
• Steer the company
– Deciding succession
• Next CEO
– Controlling and monitoring
• Standards of appraisal
– Reviewing and approving resources
– Caring for shareholders
• Ultimate responsibility
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 Top Management
• Characteristics
– Few tasks are continuous but responsibility always
present
– Require wide range of capabilities
• Analytical
• Awareness of events
• Interest in multiple actions
• Ability to pursue abstract ideas

“Good business leaders create vision, articulate vision,

own the vision and relentlessly drive it to completion”

10/16/20 - Jack Welch

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 Top Management
Responsibilities of Top Management

1. Fulfill key roles

2. Provide executive leadership
3. Manage strategic planning process

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 Top Management:
Perform Key Roles
• Mintzberg identified ten key roles which vary in
importance and time needed for each
– Figurehead
– Leader
– Liaison
– Monitor
– Disseminator
– Spokesperson
– Entrepreneur
– Disturbance handler
– Resource allocator
– negotiator

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 Top Management:
Provide Executive Leadership

• Create a great dimension to work and to worker

motivation.
• To cultivate a culture of creativity, insight, and moral
excellence
• Be a role model to others
• Communicate high performance standards for self and
others
• Show confidence in followers’ abilities

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 Top Management:
Strategic Management Process
Scan the environment
Identification Phase
SWOT Analysis
Determination of objectives
Review / Revise

•Identification of strategic
Development Phase options
•Evaluation of options
•Selection of strategy

•Organisational plans
Implementation Phase •Functional plans
•Action plans

• Re-evaluate the strategy

Monitoring Phase
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 Strategy
According to Porter:
•The root cause of the problem seems to be failure of
management to distinguish between operational
effectiveness and Strategy.
•Management tools have taken the place of strategy.
•Both operational effectiveness and strategy are necessary
for achieving superior performance of an organization
•But they operate in different ways.

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Operational Effectiveness and Strategy
Achieving superior performance

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Operational Effectiveness and Strategy
• Operational Effectiveness is necessary for superior
performance but not sufficient condition
– Rapid diffusion of best practices makes sustaining
superior performance difficult
Porter says:
• Imagine a Productivity Frontier (PF) that
– constitutes the sum of all best practices available at any point of
time.
– Shows the maximum value, that a company can create at a
given cost, using the best of technologies, inputs skills, and
management techniques
– Constantly shifts outward as new technologies, new inputs and
management approaches are developed

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 Productivity Frontier
(State of Best Practices)
High
Non price Buyer value
delivered

Low

High Low
Relative Cost Position

Operational Effectiveness (OE) competition shifts the PF

outward, raising the bar for everyone.
Such competition produces absolute improvement in OE,
but relative
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 Unique Activities
• Essence of strategy is choosing to perform
activities differently than rivals
– Uniquely align services/products to customers needs
• Strategic Positioning
– Always a function of differences on the supply side
– Not necessarily a function of differences on the
demand side
• Thus strategy is the creation of a unique and
valuable position, involving a different set of
activities.
Geetika, MNNIT
Strategic Positioning
According to Porter there are three type of
strategic positions, which are not mutually
exclusive and often overlap:

• Variety-based Positioning
• Needs-based Positioning
• Access-based Positioning

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Variety based Positioning

• It is based on choice of product or service

varieties rather than customer segments
– Produce a particular product using distinctive set of
activities
– Serve a wide array of customers but only a subset of
their needs
– Satisfy few needs of many customers

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Need based Positioning
• It is based on targeting a specific segment
of customers with a tailored set of
activities.
• Targeting segment of customers with
different needs
• Many needs of few customers

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 Access based Positioning
• It is based on segmenting customers who are
accessible in different ways.
• Reach customer in the best way
• Make profit through a set of activities that result
in a lean cost structure.
• Broad needs of many customers in narrow
market

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 Trade-offs
• A Sustainable Strategic Position Requires Trade-offs
• According to Porter, a sustainable advantage cannot be
guaranteed by simply choosing a unique position, as
competitors will imitate a valuable position in one of the
two following ways:
– A competitor can choose to reposition itself to match the
superior performer.
– A competitor can seek to match the benefits of a successful
position while maintaining its existing position (known as
straddling).

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 Trade-offs
• In order for a strategic position to be
sustainable there must be trade-offs with
other positions.
• Trade-offs create the need for choice; and
protect against repositioners and
straddlers.
• The essence of strategy is choosing what
not to do.
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 Competitive advantage and
Sustainability
• Strategic fit is fundamental not only to competitive
advantage but also to the sustainability of that
advantage.
• While operational effectiveness focuses on individual
activities, strategy concentrates on combining activities.
• It is tougher for a competitor to match an array of
interlocked activities than it is merely to replicate an
individual activity.

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 Conclusion
• A company must continually improve its
operational effectiveness and actively try to shift
the productivity frontier; at the same time, there
needs to be ongoing effort to extend its
uniqueness while strengthening the strategic fit
among its activities.
• Should be ready to change its strategic
positioning by continuously leveraging
uniqueness.

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