An Overview of Strategic

Management

Strategic Management- MBA-202

Course Coordinator: G.T.Wasantha Sriyani
Faculty of Management & Finance
25.02.2012 Handout No: 01
Highlights of this Session
Concepts in SM
SM Process
Critical Tasks in SM
Three Levels of Strategies
Vision
Mission
Core Values

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What is Strategic Management
A set of decisions and actions that result in the
formulation and implementation of plans designed to
achieve company's objectives
It is the process of specifying an organization's
objectives, developing policies and plans to achieve
these objectives, and allocating resources so as to
implement the plans.

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definition contd..
It is the highest level of managerial activity
It provides overall direction to the whole enterprise.
An organizations strategy must be appropriate for
its resources, circumstances, and objectives.
The process involves matching the companies'
strategic advantages to the business environment
the organization faces.

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definition contd
Strategic management is not a box of tricks
or a bundle of techniques. It is analytical
thinking and commitment of resources to
action. Without a strategy the organization is
like a ship without a rudder.

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Concepts in Strategic Management?
Strategy: Directing action towards desired outcome
/Means of achieving organizational objectives
Corporate Strategy: Business/es you should be in
Business strategy: Tactics to beat the competition
Functional Strategy: Operational methods to
implement the tactics
Enterprise Strategy: Matching the internal capabilities
with external environment

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Concepts contd
Strategic Competitiveness: Firm successfully
formulates & implements a value-creating strategy
Strategic Management Process: Full set of
commitments, decisions, & actions required for a
firm to achieve strategic competitiveness to earn
above-average returns
Risk: Investors uncertainty of economic gains/
losses resulting from particular investment

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Concepts contd
Average Returns: Returns equal to investor
earnings expectations from other investments with
similar amount of risk
Above average returns: Return in excess of what
an investor expects to earn from other investments
with a similar amount of risk
Strategic flexibility: Capabilities to responds to
demands & opportunities in dynamic & uncertain
competitive environments
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Nine critical tasks of strategic management

1. Formulate the company's mission, including

broad statements about its purpose,
philosophy, and goals
2. Conduct an analysis that reflects the
company's internal conditions and
capabilities
3. Assess the company's external
environment, including both the competitive
and general contextual factors
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Nine critical tasks contd

4. Analyse the company's options by

matching its resources with the external
environment
5. Identify the most desirable options by
evaluating each option in light of the
company's mission
6. Select a set of long-term objectives and
grand strategies that will achieve the most
desirable options
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Nine critical tasks contd
7. Develop annual objectives and short-term strategies
that are compatible with the selected set of long-term
objectives and grand strategies

8. Implement the strategic choices by means of budgeted

resource allocations in which the matching of tasks,
people, structures, technologies, and reward systems
is emphasized

9. Evaluate the success of the strategic process as an

input for future decision-making
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Strategic planning encompasses on:

What business do or want to be in?

What are our long-term objectives ?
What should our growth & profitability levels be?
What must we do to achieve these objectives?
What is our long-product portfolio?
Should we amalgamate, local laws and the
economy will have on our future success and so
on.

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Questions

What is planning
Why planning is important to an
organization
What differences can you look for
between the strategic planning &
planning

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Defining Strategy
A method or plan chosen to bring about a desired future,
such as achievement of a goal or solution to a problem
A plan of action designed to achieve a long-term or overall
aim
It is a large-scale, future-oriented plan for interacting with
the competitive environment to achieve company
objectives
It is a company's game plan that is using to stake out a
market position, conducts its operations, attract & please
customers, compete successfully, & achieve
organizational objectives
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 Deploy & employ resources to bridging the gap
Deploy organize
Employ make use of
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 Although that plan does not precisely
detail all future deployments (of people,
finances, and material), it does provide
a framework for managerial decisions
It reflects a company's awareness of
how, when, and where it should
compete; against whom it should
compete; and for what purposes it
should compete.
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 Michael Porter defines "strategy" in terms of
competitive strategy which is 'about being
different.' He argues that strategy is being in a
competitive position, being different in the eyes
of the customer, and adding value through a
combination of activities that are different from
those of competitors.

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 One objective of an overall corporate
strategy is to put the organization into a
position to carry out its mission effectively
and efficiently.
A good corporate strategy should integrate
an organizations goals, policies, and action
sequences (tactics) into a cohesive

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In crafting a strategy, management is saying:
Among all the paths & actions we could
have chosen,
We have decided to move in this direction,
Focus on these markets & customer
needs,
Compete in this fashion,
Allocate our resources, & energies in
these ways, and
Rely on these particular approaches to
doing business
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Dimensions of Strategic decisions

Strategic issues require top management decisions

Strategic issues require large amounts of firms
resources
Strategic issues often affect the firms long term
prosperity
Strategic issues are future oriented
Strategic issues usually have multi-functional or
multi-business consequences
Strategic issues require considering the firms
external environment
 The benefits of a strategic approach
Providing better guidance to the entire
organization on the crucial point of what we
are trying to do
Making managers & organizational members
more alert to new opportunities & threatening
developments
Helping to unify the organization
Creating a more proactive management
posture
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The benefits
Promoting the contd..
development of a constantly evolving
business model that will produce sustained bottom-
line success for the enterprise
Providing managers with a rationale for evaluating
competing budget requests steering resources
into strategy-supportive, results-producing areas

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Three Levels of Strategies
Corporate Level
Board of Directors, Chief Executives and Administrative
officers
Responsible for firms financial performance & achieving
firms non-financial goals
Business Level
Business & corporate managers
Responsible for competing in the selected product-market
arena, & secure the most promising market segment in this
arena
Help bridge decisions at the corporate & functional levels.
Eg: decisions on plant location, market segmentation,
Geographic coverage, Distribution channels, etc.
Three Levels contd.
Functional Level
Managers of geographic, & functional areas
Develop annual objectives & short term strategies
for functional areas
Responsible for implementing the firms strategic
plans formulated at the corporate & business
levels
Those involve action-oriented operational issues
& are relatively short range & low risks
Hierarchy of Objectives & Strategies
What is to be How is to be Strategic Decision Makers
achieved achieved
Top Middle Functional Lowe
Level Level Level r
Level
Mission, Corporate xx xx x
goals & Strategies
philosophy
Long-term Grand x xx xx
objectives Startegies
Annual Short-term x xx xx
objectives strategies &
Policies

XX: principal responsibility

X: secondary responsibility
 Strategic Management Process
Strategic management process is dynamic &
continuous. A change in any one of the major
components in the model can necessitate a change
in any or all of other components
Since the decade of 1970s, a large number of
corporations followed a recognized strategic
management model, which is top down in nature.
According to this model, the top management would
design the strategy of the company and it was
passed on downward in the company for application
Strategic Management Process

Mission &
Objectives

Environmental
Scanning

Strategy
Formulation

Strategy
Implementation

Evaluation &
Control
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 Strategic Management Model

Company Mission

Analysis of External Analysis of internal

Environment Environment

Strategy Analysis & Choice

Establishing Long Establishing Generic &

term Objectives Grand Strategies

Establishing Short Establishing Functional

Formulating Policies
term Objectives Tactics

Strategy Implementation
(Organizational Structure, Leadership, Culture)

Strategy Evaluation
Stages of Strategic Management Process

Strategy Formulation
Strategy Implementation
Strategy Evaluation & Control
Strategy Formulation
Strategy Formulation Includes
developing a vision & mission,
Identifying an organizations external
opportunities & threats,
Determining internal strengths & weaknesses,
Establishing long-term objectives,
Generating alternative strategies, &
Choosing particular strategies to pursue
Strategy Implementation
Strategy Implementation includes
Establishing annual objectives, devise policies,
motivate employees, & allocate resources
Developing a strategy supportive culture
Creating an effective organizational structure
Redirecting marketing efforts
Preparing budgets
Linking employee compensation to
organizational performance
Strategy Evaluation & Control
Strategy Evaluation & Control includes
Reviewing external & internal factors that are the
bases of current strategies
Measuring performance
Taking corrective actions