STRATEGIC MANAGEMENT Strategy: A plan of action or policy designed to achieve a major or overall plan called as the strategy.

Or the art and science of planning and organising resources for their most effective us. Or a method or plan to bring about desired future, such as achievement of goal or solution to problem. A strategy is a long term plan of action designed to achieve a particular goal. Strategy applies to many fields such as : military strategy, economic strategy, environmental strategy, corporate strategy, business strategy, industry strategy, investment strategy etc. Strategy is essentially linked with military science. It implies facing the enemy under war conditions that are to ones advantage. A policy when given a particular meaning under a prevailing situation and in view of the enemy or competitor policy becomes strategy. So strategy can be defined as interpretative planning. Strategy includes the determination and evaluation of alternatives paths to an already established mission or objective, and eventually choosing the right alternatives. In common sense, a strategy outlines how management decides and plans to achieve its goals and objectives. Management formulates strategy to shed out the effects of other policy of its overall plan and programs of the competitors, policy to avail competitive advantage. Origin/ evolution of the word strategy The word strategy is derived from the Greek word strategia combination of two wordsstratus ( means army) and ago ( meaning lead / moving) which implies the science, art, tact, and quality of being an efficient and effective army general. The word strategia was first time quoted around 400 BC among the Greeks. A Greek army general had to define and explain the purpose; the objectives and tactical procedures followed in leading an army against the enemies to win the battle, hold territory, defend and protect the country from the invision or to conquer new territory.

Definition of the strategy Strategy is an action that managers take to attain one or more of the organisations goals. The strategy also can be defined as A general direction set for the company and its various components to achieve a desired state in future Strategy is all about integrating organisational activities and allocating the scarce resources within the organisational environment so as to meet the present objectives

INTRODUCTION TO STRATEGIC MANAGEMENT

Strategy is a well-defined roadmap of an organisation. It defines the overall mission, vision and directions of an organisation. The objective of a strategy is to maximise an organisations strength and minimise the weaknesses. Strategy in short bridges the Gap between where We are and Where We want to be Features of the strategy A listed below the important characteristics of the strategy they are: 1. It is generally long-range in nature. Though it is valid for short range situations also and short-range implications. 2. Strategies are action oriented. 3. Strategies are specific actions suggested to achieve the objectives. 4. Strategies are mean to an end. 5. Strategies are concerned with competitive situations like risk, uncertainty to take place at a future date. 6. Strategy is deployed (used) to mobilise the available resources in the best interest of the company. 7. Strategy relates the firm to its environment, particularly the external environ-ment in all actions whether objective setting, or actions and resources required for its achievement. This definition emphasizes on the systems approach of management and treats an organization as part of the society consequently affected by it. 8. Strategy is the right combination of factors both external and internal. In relating an organization to its environment, the management must also consider the internal factors too, particularly its strengths and weaknesses, to take various courses of action. 9. Strategy is relative combination of actions. The combination is to meet a particular condition, to solve certain problems, or to attain a desirable objective. It may take any form; for every situation varies and, therefore, requires a somewhat different approach. 10. Strategy may even involve contradictory action. Since strategic action depends on environmental variables, a manager may take an action today and revise or reverse his steps tomorrow depending on the situations. 11. Strategy is forward looking. It has orientation towards the future. Strategic ac-tion is required in a new situation. Nothing-new requiring solutions can exist in the past, and so strategy is relevant only to the future. STRATEGIC MANAGEMENT The term strategic management is used to refer to the entire scope of strategic-decision making activity in an organization. Strategic management as a concept has evolved over time and will continue to evolve. As result there are a variety of meanings and interpretations depending on the author and sources. For example, some scholars and practitioners the term strategic planning connote the total strategic management activities. Moreover, sometimes managers use the terms strategic management, strategic planning, and long-range planning interchangeable. Finally, some of the phrases are used interchangeably with strategic management are strategy and policy formulation, and business policy.

INTRODUCTION TO STRATEGIC MANAGEMENT

The following statements serve as a number of workable definitions of strategic management: The set of managerial decisions and actions that determines the long-run performance of a corporation. It includes: environmental scanning (internal & external) strategy formulation strategy implementation evaluation and control It focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success. Strategic management is the process of managing the pursuit of organizational mission while managing the relationship of the organization to its environment (James M. Higgins). Strategic management is defined as the set of decisions and actions resulting in the formulation and implementation of strategies designed to achieve the objectives of the organization (John A. Pearce II and Richard B. Robinson, Jr.). Strategic management is the process of examining both present and future environments, formulating the organization's objectives, and making, implementing, and controlling decisions focused on achieving these objectives in the present and future environments (Garry D. Smith, Danny R. Arnold, Bobby G. Bizzell). Strategic management is a continuous process that involves attempts to match or fit the organization with its changing environment in the most advantageous way possible (Lester A. Digman). Strategic management, as minimum, includes strategic planning and strategic control. Strategic planning describes the periodic activities undertaken by organizations to cope with changes in their external environments (Lester A. Digman) It involves formulating and evaluating alternative strategies, selecting a strategy, and developing detailed plans for putting the strategy into practice. Strategic planning consists of formulating strategies from which overall plans for implementing the strategy are developed. Strategic control consists of ensuring that the chosen strategy is being implemented properly and that it is producing the desired results. Based on Robert Anthony's framework, three types of planning and control are required by organizations: * Strategic Planning and Control - the process of deciding on changes in organizational objectives, in the resources to be used in attaining these objectives, in policies governing the acquisition and use of these resources, and in the means (strategies) of attaining the objectives. Strategic planning and control involve actions that change the character or direction of the organization.
INTRODUCTION TO STRATEGIC MANAGEMENT

* Management Planning and Control - the process of ensuring that resources are obtained and used efficiently in the accomplishment of the organization's objectives. Management planning and control is carried on within the framework established by strategic planning and is analogous to operating control. * Technical Planning and Control - the process of ensuring efficient acquisition and use of resources, with respect to those activities for which the optimum relationship between outputs and resources can be accurately estimated (e.g., financial, accounting, and quality controls). Another important term in the study of strategic management is long-range planning. Long-range planning, planning for events beyond the current year, is not synonymous with strategic management (or strategic planning). Not all long-range planning is strategic. Certain strategic actions and reactions can be relatively short range and may include more than just planning aspects. It is perfectly reasonable to have long-range operating or technical plans that are not strategic. However, it should be noted that most strategic decisions have long-term ramifications. Strategic management process Introduction Strategy formulation is the process by which an organization chooses the most appropriate courses of action to achieve its defined goals. This process is essential to an organizations success, because it provides a framework for the actions that will lead to the anticipated results. Strategic plans should be communicated to all employees so that they are aware of the organizations objectives, mission, and purpose. Strategy formulation forces an organization to carefully look at the changing environment and to be prepared for the possible changes that may occur. A strategic plan also enables an organization to evaluate its resources, allocate budgets, and determine the most effective plan for maximizing ROI (return on investment). A company that has not taken the time to develop a strategic plan will not be able to provide its employees with direction or focus. Rather than being proactive in the face of business conditions, an organization that does not have a set strategy will find that it is being reactive; the organization will be addressing unanticipated pressures as they arise; and the organization will be at a competitive disadvantage. Strategy formulation requires a defined set of six steps for effective implementation. Those steps are: 1. Define the organization, 2. Define the strategic mission, 3. Define the strategic objectives, 4. Define the competitive strategy, 5. Implement strategies, and 6. Evaluate progress. In this reading, we will explore each of the six steps for strategy formulation.

INTRODUCTION TO STRATEGIC MANAGEMENT

Step 1. Define the Organization The first step in defining an organization is to identify t he companys customers. Without a strong customer base, whose needs are being filled, an organization will not be successful. A company must identify the factors that are valued by its customers. Is the value based on a superior product or service relative to the competition? Are your customers buying your products for your low prices? Do you produce products that meet image needs of your customers? Lets review some of the ways in which companies can define themselves. End Benefit Organizations must remember that people are buying benefits not features. For example, if an airline only defined itself as being in the business of flying people from one place to another, then it would view its competition as being only other airlines. However, if it views itself as being in the transportation business, then it will recognize that its competition includes not only other airlines, but also trains, buses, car rental companies, and other ways of getting people from one place to another place. An airline must highlight the benefits of using its method of transportation as a means of persuading customers to purchase its service. Furthermore, an organization can explain how its product works or how it is built. Inevitably, customers will ask the question, Whats in it for me? Companies must be able to answer this question in order to meet the needs of their customers. They must be able to respond effectively to the so what? in order to influence customers to buy their product or service. Target Market Companies can become successful by identifying themselves with a particular target group. This focus should not be limited only to demographic segmentation (i.e., age, income, education, gender, income, family life-cycle, culture) but also by psychographic indicators. For example, by understanding the values, attitudes, opinions, and lifestyles of a companys customers, the organization can better provide ways in which to meet its customers needs. For example, Nike has successfully identified itself not only with professional athletes, but with those who want to be part of the athlete world. Nikes marketing message has made everyone who wishes to participate in sports feel as if they can achieve their athletic goals. While most people who purchase Nike products are not professional athletes, the people who buy Nikes products are able to identify with Nikes culture and feel like they are part of an exclusive group. Technology

INTRODUCTION TO STRATEGIC MANAGEMENT

Computer companies, medical research companies, and other companies that identify themselves with the tech world will find that they must be able to quickly adapt to changes in the marketplace. New products, services, and inventions are frequently introduced, making this a very difficult and challenging business environment in which to operate. For example, Genentech, Inc. conducts genetic engineering and medical research for the pharmaceutical industry. This company uncovers and discovers new advances every day, making it challenging to develop a specific strategy plan for its products and services. However, by defining the company as being in the biotech industry, it can develop a strategy for its overall corporate goals. Step 2. Define the Strategic Mission An organizations strategic mission offers a long-range perspective of what the organization strives for going forward. A clearly stated mission will provide the organization with a guide for carrying out its plans. Elements of a strong strategic mission statement should include the values that the organization holds, the nature of the business, special abilities or position the organization holds in the marketplace, and the organizations vision for where it wants to be in the future. Step 3. Define the Strategic Objectives This third step in the strategic formulation process requires an organization to identify the performance targets needed to reach clearly stated objectives. These objectives may include: market position relative to the competition, production of goods and services, desired market share, improved customer services, corporation expansion, advances in technology, and sales increases. Strategic objectives must be communicated with all employees and stakeholders in order to ensure success. All members of the organization must be made aware of their role in the process and how their efforts contribute to meeting the organizations objectives. Additionally, members of the organization should have their own set of objectives and performance targets for their individual roles. Step 4. Define the Competitive Strategy The next step in strategy formulation requires an organization to determine where it fits into the marketplace. This applies not only to the organization as a whole, but to each individual unit and department throughout the enterprise. Each area must be aware of its role within the company and how those roles enable the organization to maintain its competitive position. Another step in the competitive strategy process requires an organization to develop proactive responses to potential changes in the marketplace. As discussed in earlier

INTRODUCTION TO STRATEGIC MANAGEMENT

readings, an organization must not wait for events in the marketplace to occur before taking steps; they must identify possible events and be prepared to take action. The final step in defining a competitive strategy is identifying an organizations resources and determining how those resources will be used. Each department, division, or location will have its own set of needs, and a company must determine how it will allocate resources in order to meet those needs. Three factors must be considered when determining the overall competitive strategy: the industry and marketplace, the companys position relative to the competition, and the companys internal strengths and weaknesses. The Industry When evaluating the overall industry, factors to be looked at include: size of the market, past and potential market growth, competitive profitability, new market entries, and industry threats.

These market factors must be evaluated on a regular basis, as small changes may have a large impact on an organizations business activities. For example, if an organization becomes aware of new technology that is on the verge of being introduced into the marketplace, then it can avoid making any new plans that would involve the older, existing technology available. Also, if an organization is considering global expansion, then it would be beneficial to be aware of emerging markets, other areas of potential growth, and what other companies have already entered in those markets. The Competition An organization cannot be successful unless it has a full understanding of the other players in marketplace. A company must be able to identify the strengths and weaknesses of the competition and analyze the ways in which the competitions products or services meet the needs of its customer base. Has the competition created a significant product differentiation strategy? Has the competition cornered a specific target market? Is the competition in full-scale competition with another company? It is essential for these questions to be answered in order to develop the appropriate strategy for successful competition. As mentioned earlier, we discussed how competition for an airline is not only other airlines, but also other modes of transportation. Evaluating competition requires a company to look at organizations that provide substitutes for its product or service as well as those who provide the same products and services.

INTRODUCTION TO STRATEGIC MANAGEMENT

Strengths & Weaknesses Lets go back to the traditional, well-known marketing tool of the SWOT analysis. As you may recall, SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats. Opportunities and threats are external factors; strengths and weaknesses are internal factors. When developing a competitive strategy, it is vital for an organization to be fully aware of its internal strengths and how those strengths relate to the competition. These strengths should be maximized and leveraged to the companys advantage as well as highlighted in all business and marketing activities that the company undertakes. It is equally important for an organization to take an honest look at its areas of weakness. This is where a company can become vulnerable to outside market conditions, such as competitive gains, advances in technology, economic shifts, and other factors. By identifying areas in need of improvement and taking steps to remedy those areas, a company will be in a stronger competitive position. Step 5. Implement Strategies Developing a strategy is only effective if it is put into place. An organization may take all the necessary steps to understand the marketplace, define itself, and identify the competition. However, without implementing the strategy, the organizations work will be of little to no value. The methods employed for implementing strategies are known as tactics. These individual actions enable an organization to build a foundation for implementation. Companies are able to identify which of their efforts are more successful than others and will uncover new methods of implementation, if necessary. Step 6. Evaluate Progress As in any plan, a regular evaluation of processes and results is vital to ongoing success. An organization must keep track of the progress it is making as defined by its strategic plan. If goals are not being met, the organization must be adaptable and flexible to recognize that changes may be needed. An organization should consider the following questions on a continuous basis in order to evaluate progress: Have market conditions changed that may require a change in corporate direction? Are there new entries in the marketplace to pose a competitive threat? Has the organization been successful in translating their strategy into actionable steps? An organization will be able to successfully implement its strategy both now and in the future through evaluating feedback. Conclusion

INTRODUCTION TO STRATEGIC MANAGEMENT

A strategic plan is a living document that changes and grows as the conditions around it change. If an organization recognizes that it must constantly be aware of the business world around it and must be flexible to the changes that will inevitably occur, then it will be in a position to adapt and modify its plans to achieve maximum success. Hierarchical Levels of Strategy

Strategy can be formulated on three different levels:

corporate level business unit level functional or departmental level.

While strategy may be about competing and surviving as a firm, one can argue that products, not corporations compete, and products are developed by business units. The role of the corporation then is to manage its business units and products so that each is competitive and so that each contributes to corporate purposes. Consider Textron, Inc., a successful conglomerate corporation that pursues profits through a range of businesses in unrelated industries. Textron has four core business segments:

Aircraft - 32% of revenues Automotive - 25% of revenues Industrial - 39% of revenues Finance - 4% of revenues.

While the corporation must manage its portfolio of businesses to grow and survive, the success of a diversified firm depends upon its ability to manage each of its product lines. While there is no single competitor to Textron, we can talk about the competitors and strategy of each of its business units. In the finance business segment, for example, the chief rivals are major banks providing commercial financing. Many managers consider the business level to be the proper focus for strategic planning. Corporate Level Strategy Corporate level strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses. Corporate level strategy is concerned with:

Reach - defining the issues that are corporate responsibilities; these might include identifying the overall goals of the corporation, the types of businesses in which the corporation should be involved, and the way in which businesses will be integrated and managed. Competitive Contact - defining where in the corporation competition is to be localized. Take the case of insurance: In the mid-1990's, Aetna as a corporation

INTRODUCTION TO STRATEGIC MANAGEMENT

was clearly identified with its commercial and property casualty insurance products. The conglomerate Textron was not. For Textron, competition in the insurance markets took place specifically at the business unit level, through its subsidiary, Paul Revere. (Textron divested itself of The Paul Revere Corporation in 1997.) Managing Activities and Business Interrelationships - Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing financial resources across business units, and using business units to complement other corporate business activities. Igor Ansoff introduced the concept of synergy to corporate strategy. Management Practices - Corporations decide how business units are to be governed: through direct corporate intervention (centralization) or through more or less autonomous government (decentralization) that relies on persuasion and rewards.

Corporations are responsible for creating value through their businesses. They do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio. Business Unit Level Strategy A strategic business unit may be a division, product line, or other profit center that can be planned independently from the other business units of the firm. At the business unit level, the strategic issues are less about the coordination of operating units and more about developing and sustaining a competitive advantage for the goods and services that are produced. At the business level, the strategy formulation phase deals with:

positioning the business against rivals anticipating changes in demand and technologies and adjusting the strategy to accommodate them influencing the nature of competition through strategic actions such as vertical integration and through political actions such as lobbying.

Michael Porter identified three generic strategies (cost leadership, differentiation, and focus) that can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces. Functional Level Strategy The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively. Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing

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information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed. Scope of strategic management J. Constable has defined the area addressed by strategic management as "the management processes and decisions which determine the long-term structure and activities of the organization". This definition incorporates five key themes: * Management process. Management process as relate to how strategies are created and changed. * Management decisions. The decisions must relate clearly to a solution of perceived problems (how to avoid a threat; how to capitalize on an opportunity). * Time scales. The strategic time horizon is long. However, it for company in real trouble can be very short. * Structure of the organization. An organization is managed by people within a structure. The decisions which result from the way that managers work together within the structure can result in strategic change. * Activities of the organization. This is a potentially limitless area of study and we normally shall centre upon all activities which affect the organization. These all five themes are fundamental to a study of the strategic management field and are discussed further in this chapter and other part of this thesis. Importance of Strategic Management to an Organization Strategic management involves managers using different strategies to get maximum performance from workers and business processes. Managers consider the impact of each decision, and decisions that might detract from other objectives are abandoned. Before a decision is finalized, it might be considered by multiple players in the organization. Diverse perspectives help the organization adopt a well-rounded approach to managing work. Decision-Making Strategic decisions are made using a model; managers align workers, routines and resources with company goals and policies. Managers make routine decisions using a decision matrix or a flowchart, or according to policies and procedures manuals, to ensure standardized quality of products and services. In other models, workers and managers might have more discretion. Strategic management involves studying how decisions help the organization achieve its goals. Resource Management Managers get input from whomever they need. If a manager needs to cut costs in car production, she can talk to car designers, engineers, material buyers, purchasing agents, equipment manufacturers and other employees with potential input. Next, she uses a standard process for making a decision. She might even get a team of managers to vote on the best option. A decision must have maximum returns, and resources are not for serving the narrow requirements of an individual or department.

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Flexibility A strategic management system must include a high degree of flexibility. Even when managers use a decision matrix or another model for making decisions, they need flexibility to break from the model when business conditions demand it. For example, a customer service manager can approve a special refund for a long-time customer so that he will continue to do business with the company even when customer service reps cannot automatically issue refunds to customers. Talent Development Managers who use strategic management concepts to lead their teams realize the importance of organizational learning. They use different strategies to develop the talents of their workers. They plan for the future to ensure workplace learning prepares the next generation of workers to fill key positions. An organization that doesn't make the best use of talents and prepare the work force for the future cannot strategically manage. That's because human resources aren't strategically used if they are underutilized.

A well-formulated strategy can bring various benefits to the organization in present as well as in future. 1. Strategic management takes into account the future and anticipates for it. 2. A strategy is made on rational and logical manner, thus its efficiency and its success are ensured. 3. Strategic management reduces frustration because it has been planned in such a way that it follows a procedure. 4. It brings growth in the organization because it seeks opportunities. 5. With strategic management organizations can avoid helter & skelter and they can work directionally. 6. Strategic management also adds to the reputation of the organization because of consistency that results from organizations success. 7. Often companies draw to a close because of lack of proper strategy to run it. With strategic management companies can foresee the events in future and thats why they can remain stable in the market. 8. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success. 9. Strategic management focuses on proactive approach which enables organization to grasp every opportunity that is available in the market. Business Policy Definition of Business Policy Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals

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INTRODUCTION TO STRATEGIC MANAGEMENT

with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run. Features of Business Policy An effective business policy must have following features1. Specific- Policy should be specific/ definite. If it is uncertain, then the implementation will become difficult. 2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy. 3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. 4. Appropriate- Policy should be appropriate to the present organizational goal. 5. Simple- A policy should be simple and easily understood by all in the organization. 6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive. 7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. 8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance. Policies are broad statements, adopted by a business, that set out what the business stands for and what its goals are. Procedures are usually implemented to support each policy explaining how to apply the policy to the business's customers, employees and products, and the instructions necessary to follow the policy.

Examples of areas where businesses typically institute policies are ethics, human resources, accounting and customer service. Ethics Ethics policies address issues such as honesty, fairness, integrity and respect. For example, the long-standing ethics policy regarding honesty instituted at Levi Strauss and Co. as quoted by Inc.com reads: Honesty: We will not say things that are false. We will never deliberately mislead. We will be as candid as possible, openly and freely sharing information, as appropriate to the relationship. Human Resources Policies imposed in the area of human resources address issues such as hiring and termination, benefits, promotion and salary increase and discipline. For example, a typical

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INTRODUCTION TO STRATEGIC MANAGEMENT

human resources policy addressing hiring might read: New hires shall be subject to a three month probationary period during which employment is 'at-will.' Customer Service Customer service policies address issues such as employee attitude toward customers. A sample policy dealing with customer relations as reported by Infonet.com reads: All employees deal with our customers! No matter what your position, every employee impacts the customer in some way. Employees are reminded to promote the company just as they would represent their families. This means being friendly and courteous on the business property, while visiting our stores, driving our vehicles on roads and highways and in daily interactions. After all, you never know who knows the person you are talking to... Other ways employees can enhance customer relationships are to answer phones before three rings, transfer office calls correctly, follow through on promises, give updates if necessary, greet walk-in customers or just smile and say hello. Treating other as you expect to be treated goes a long way in customer service relationships. Accounting Accounting policies deal with how money is handled in the company, both the spending and the documenting of inflow and out-flow. An example of a typical accounting policy regarding receipt of gifts to an organization might read: Gifts of stock, bonds, manuscripts, art and antiques are recorded and such information is openly available to officers, stock holders and employees as with any other corporate asset. Difference between Policy and Strategy The term policy should not be considered as synonymous to the term strategy. The difference between policy and strategy can be summarized as follows1. Policy is a blueprint of the organizational activities which are repetitive/ routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form. 2. Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management. 3. Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions. 4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action. 5. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy.

GAP ANALYSIS The evaluation of the difference between a desired outcome and an actual outcome. This difference is called a gap. Strategic gap analysis attempts to determine what a company should do differently to achieve a particular goal by looking at the time frame, management, budget and other factors to determine where shortcomings lie. After conducting this analysis, the company should develop an implementation plan to eliminate the gaps.

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For example, if a small restaurant wanted to become a top tourist destination but currently only served locals, a strategic gap analysis would look at the changes required for the restaurant to meet its goals. These changes might include relocating to an area with more tourists, altering the menu to appeal to out-of-town visitors, hiring more staff so the restaurant's hours become more convenient for travellers, and so on. The analysis would also determine how to make these changes happen. If a business doesn't know where it stands in relation to its goals, it is not likely to achieve them. Gap analysis is a formal study of what a business is doing currently and where it wants to go in the future. It can be conducted, in different perspectives, as follows: 1. Organization (e.g., human resources) 2. Business direction 3. Business processes 4. Information technology Gap analysis provides a foundation for measuring investment of time, money and human resources required to achieve a particular outcome. The need for new products or additions to existing lines may emerge from portfolio analysis, in particular from the use of the Boston Consulting Group Growth-share matrixor the need may emerge from the regular process of following trends in the requirements of consumers. At some point, a gap emerges between what existing products offer and what the consumer demands. The organization must fill that gap to survive and grow.Gap analysis can identify gaps in the market. Thus, comparing forecast profits to desired profits reveals the planning gap. This represents a goal for new activities in general, and new products in particular. The planning gap can be divided into three main elements: 1. Usage gap This is the gap between the total potential for the market and actual current usage by all consumers in the market. Data for this calculation includes: a. Market potential The maximum number of consumers available is usually determined by market research, but it may sometimes be calculated from demographic data or government statistics. b. Existing usage Existing consumer usage makes up the total current market, from which market shares are calculated. c. Current industrial potential usage gap = market potential existing usage Usage gap is most important for brand leaders. If a company has a significant share of the whole market, they may find it worthwhile to invest in making the market bigger. 2. Product gap The product gapalso called the segment or positioning gapis that part of the market a particular organization is excluded from because of product or service characteristics. This may be because the market is segmented and the organization does not have offerings in some segments, or because the organization positions its offerings in a way that effectively excludes certain potential consumersbecause competitive offerings are much better placed for these consumers.

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3. Competitive gap The competitive gap is the share of business achieved among similar products, sold in the same market segment and with similar distribution patterns or at least, in any comparison, after such effects have been discounted. The competitive gap represents the effects of factors such as price and promotion, both the absolute level and the effectiveness of its messages. STRATEGIC MANAGEMENT VS OPERATIONAL MANAGEMENT Strategic management Long Term Exposes Choices Guided by political values Developed in an organisational pause Grounded in the environment Looks outward to impact Looks to the network of other organisation Sees interrelationships with tasks Has an awareness of uncertainty Operations management Short Term Continuity Expresses professional concerns Has the necessity of continuing activity Grounded in the organisation Focuses on activity Limited by organisational boundaries

Is centred on specific tasks concerned with certainty of continuity

Reasons why strategic plans fail Understanding the value of and need for a strategic plan is a great place to start, but just wanting something, isnt enough. If it were, wed all be famous actors in Hollywood. Developing a strategic plan takes discipline, foresight, and a lot of honesty. Regardless how well you prepare, youre bound to encounter challenges along the way. Here are 10 reasons why plans fail. Avoid these traps and youll be closer to your goal of implementing a strategic plan that actually achieves results and improves your business. 1. Having a plan simply for plans sake. Some organizations go through the motions of developing a plan simply because common sense says every good organization must have a plan. Dont do this. Just like most everything in life, you get out of a plan what you put in. If youre going to take the time to do it, do it right.

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2. Not understanding the environment or focusing on results. Planning teams must pay attention to changes in the business environment, set meaningful priorities, and understand the need to pursue results. 3. Partial commitment. Business owners/CEOs/presidents must be fully committed and fully understand how a strategic plan can improve their enterprise. Without this knowledge, its tough to stay committed to the process. 4. Not having the right people involved. Those charged with executing the plan should be involved from the onset. Those involved in creating the plan will be committed to seeing it through execution. 5. Writing the plan and putting it on the shelf. This is as bad as not writing a plan at all. If a plan is to be an effective management tool, it must be used and reviewed continually. Unlike Twinkies or a fine vino, strategic plans dont have a good shelf life. 6. Unwillingness or inability to change. Your company and your strategic plan must be nimble and able to adapt as market conditions change. 7. Having the wrong people in leadership positions. Management must be willing to make the tough decisions to ensure the right individuals are in the right leadership positions. The right individuals include those who will advocate for and champion the strategic plan and keep the company on track. 8. Ignoring marketplace reality, facts, and assumptions. Dont bury your head in the sand when it comes to marketplace realities, and dont discount potential problems because they have not had an immediate impact on your business yet. Plan in advance and youll be ready when the tide comes in. 9. No accountability or follow through. Be tough once the plan is developed and resources are committed and ensure there are consequences for not delivering on the strategy. 10. Unrealistic goals or lack of focus and resources. Strategic plans must be focused and include a manageable number of goals, objectives, and programs. Fewer and focused is better than numerous and nebulous. Also be prepared to assign adequate resources to accomplish those goals and objectives outlined in the plan. By avoiding these pitfalls, you can create an effective planning process, build a realistic business direction for the future, and greatly improve the chances for successful implementation of your strategy. Strategic intent An organizations strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. Strategic intent gives a picture about what an organization must get into immediately in order to achieve the companys vision. It motivates the people. It clarifies the vision of the vision of the company. Strategic intent helps management to emphasize and concentrate on the priorities.

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Strategic intent is, nothing but, the influencing of an organizations resource potential and core competencies to achieve what at first may seem to be unachievable goals in the competitive environment.A well expressed strategic intent should guide/steer the development of strategic intent or the setting of goals and objectives that require that all of organizations competencies be controlled to maximum value. Strategic intent includes directing organizations attention on the need of winning; inspiring people by telling them that the targets are valuable; encouraging individual and team participation as well as contribution.

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INTRODUCTION TO STRATEGIC MANAGEMENT