BBA 3RD YEAR STRATEGIC MANAGEMENT
CHAPTER 1
Understanding strategy: The term strategy is derived from a Greek word strategies,which means general
ship-the actual direction of military force.It literally means the art of the general. But in business parlance
strategy can be defined as
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Determination of basic long term goals of the business house
The course of action to achieve these goals
Resource allocation.
Different levels of strategy
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Corporate level
Business level
Functional level
Phases in the strategic management process
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Establishment of strategic intent
Formulation of strategies
Implementation of strategies
Performing strategic evaluation and control
CHAPTER 2
Hierarchy of strategic intent
Strategic intent: refers to the purpose the organisation strives for. Strategic intent can be expressed in the form of
vision and mission statements at the corporate level and at business level these could be expressed through goals
and objectives.
Vision
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Vision: miller and Dess define vision as the” category of intentions that are broad, all inclusive and
forward thinking”
The benefits of having a vision
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Good visions are inspiring
Good visions help in the creation of a common identity.
Good visions are original and unique
Good vision foster long term thinking
Mission
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Mission: mission is the purpose or reason for the organizations existence. Thompson defines mission as
the “essential purpose of the organization ,concerning particularly why it is in existence, the nature of
the businesses it is in and the customers it seeks to serve and satisfy”
Characteristics of mission statement
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It should be feasible
It should be precise
It should be clear
It should be motivating
It should be distinctive
Goals and objectives
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Goals: what an organization aspires to accomplish in a future period of time are defined in goals.
Almost all the financial and non financial issues are addressed by the goals.
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Objectives: are specific in nature as compared to goals which are generalised. Objectives clearly
specify how the goals are to be achieved. Objectives make the goals operational.
Role of objectives
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Objectives define the organisational relationship with its environment
Objectives help an organisation to pursue its vision and mission
Objectives provide the standards for performance appraisal
CHAPTER 3
Environmental appraisal
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Environment concept: environment generally means the surroundings but in business connotations it
can be defined as all the external factors which influence business in any way whether positive or
negative.
Characteristics of environment
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Environment is complex
Environment is dynamic
Environment is multi-faceted
Environment has a far reaching impact
Environmental sectors
In order to simplify the environmental complexities the environment is classified into sectors which help
organisations to identify the sectors which are favouring its growth and also recognise the sectors which may be
threat to its existence. Broadly environmental sectors are classified into eight sectors viz-a-viz market,
technological, supplier, economic, regulatory, political, sociocultural and international
Market environment
The market environment consists of the factors related to other organisations that compete with and have an
impact on the organisations market and business. Some of the important factors in market environment are as
follows
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Customers factors: such as preferences,needs,values,attitudes,buying behaviour and satisfaction of
customers
Product factors: such as the demand,features,image,utility,design,price,life cycle,differenciation and
availability of substitutes of products or services
Marketing intermediary factors such as middlemen, distribution channels,logistics,costs etc
Competition related factors such as the different types of competitors, nature of competition, and
strategic position of major competitors.
Technological environment
The technological environment includes the factors related to the knowledge applied and the material and
machines used in the production of goods and services. Some of the important factors in the technological
environment are as follows
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Cost of technology acquisition, collaboration in and transfer of technology
Change and rate of change of technology and research and development
Impact of technology, the man machine system.
Supplier environment
Generally suppliers environment consist of factor related to availability of the factors of production or
service that have an impact on the business of the organisation. Some of the important factors operating
in the supplier environment are as follows
 Cost, availability and continuity of supply of raw material, components and parts.
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Cost and availability of finance for implementing projects
Cost, reliability and availability of energy used in production
Cost, availability and dependability of human resources
Economic environment
Economic conditions, economic policies and economic system are the variables which are taken into account
while studying economic environment. Some of the factors are as follows
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The economic stage at which the country exists
The economic structure of the country such as capitalistic, socialistic or mixed
Economic policies such as industrial, monetary and fiscal policies
Financial institutions ,banks , modes of transportation , communication etc
Regulatory environment
This factor deals with planning, promotion and regulation of economic activities by the government. Some of
the important factors operating in regulatory environment are as follows
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The constitution ,fundamental rights ,directive principles ,delegation of powers between centre and
state government
Policies related to imports and exports
Policies related to dealing with licensing ,monopolies ,foreign investment etc
Policies related to pricing and its control
Political environment
The political environment primarily deals with management of public affairs. Some of the important factors
operating in political environment are as follows
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The nature of political system ,ideological forces ,political parties etc
The political structure and its stability
Political processes like funding of elections ,party system operations ,and legislations
Governments role in business ,political philosophy etc
Socio-cultural environment
The socio-cultural fabric is an important environmental factor that should be analysed while
formulating business policies .some of the important socio-cultural factors are as follows
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Demographic variables such as population ,changes in population ,age composition ,inter- state
migration ,income distribution etc
Societal concerns such as environmental pollution ,corruption ,use of mass media ,consumerism etc
Family structure and changes in it ,family values etc
position and role of the men ,women ,children and the aged in the society
Educational levels ,awareness of rights ,work ethics etc
International environment
The international environment is very important from the point of view of certain categories of business. It is
particularly important for industries directly depending on imports and exports. Some of the important factors in
international environment are as follows
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Global economic forces, organisations, blocs..
Global trade and commerce, its process and trends
Global financial system, sources of financing.
Global demographic patterns and shifts
Global market and competitiveness
Global legal system and arbitration mechanism
CHAPTER 4
Organisational appraisal
As far as organisational appraisal is concerned hereby an organisation analyse the factors which are generally
regarded as controllable. These factors are also called as internal factors or micro factors. The various factors
which are considered in organisational appraisal are as follows
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Financial capability
Marketing capability
Operational capability
Personnel capability
Information management capability
Financial capability
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Financial capability factors relate to the availability, usage, and management of funds. Some important
factors which influence the financial capability of an organisation are as follows
Capital structure, capital procurement, working capital availability, borrowings, reserves and surplus
and relationship with lenders, banks, and financial institutions
Capital investment, fixed asset acquisition, current assets, loans and advances
Financial accounting and budgeting systems, state of financial health, cost reduction and control and
tax planning.
Marketing capability
Marketing capability factors relate to the pricing, promotion, and distribution of goods or services. Some of the
important factors which influence the marketing capability of an organisation are as follows
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Variety, differentiation, quality, packaging and others
Pricing objectives, policies, changes, protection etc
Distribution, transportation and logistics, marketing channels, marketing intermediaries and so on
Production tools, sales promotion, advertising, public relations etc
Operational capability
Operational capability factors relate to the production of products and services, the use of material resources and
so on. Some of the important factors which influence the operational capability of an organisation are as follows
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Capacity, location,, layout, product or service design , work systems, extent of automation and so on
Aggregate production planning, material supply, inventory, cost and quality control, system
maintenance and so on.
Personnel, facilities and product development, level of technology used, technical collaborations etc
Personnel capability
Personnel capability factors relate to the existence and use of human resources and skills. Some of the important
factors which influence the personnel capability of an organisation are as follows
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System for manpower planning,selection,development,compensation,communication and appraisal
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Corporate image, quality of managers, staff and workers, perception about the organisation as an
employee, working conditions etc
Union management relationship, collective bargaining, safety, welfare, security etc
Information management capability
This factor relate to the design and management of the flow of the information from outer world to the corridors
of the organisation, so that it serves the purpose of effective decision making for the organisation. Some of the
important factors which influence the information capability of an organisation are as follows
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Sources, quantity, quality, and timeliness of information,retention capacity, and security of information
Database management, computer systems, software capability, and ability to synthesise information
Availability and preciseness of information formats, and capacity to use information
Availability of IT infrastructure, its relevance, and compatibility to organisational needs. Availability
of computer professionals and so on.
CHAPTER 5
Corporate level strategies
Corporate level strategies are basically about the choice of direction that a firm adopts in order to achieve its
objectives. There are four alternative strategies viz stability, expansion, retrenchment, combination strategies.
Stability strategy
The stability grand strategy is adopted by an organisation when it attempts at an incremental change or no
change at all of its functional performance in term of their respective customer group, customer functions, and
alternate technologies. Stability strategy is further divided into two strategies
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No change strategy: As the term indicates, in this type of stability strategy nothing new is done that is
keep doing what you are doing. This kind of strategy can only be adopted when the external
environment is predictable and certain. There are no significant opportunities or threats operating in the
environment.
Pause/proceed with caution strategy: This strategy is employed by firms that wish to test the ground
before moving ahead with full fledged grand strategy, or by firms that have had a amazing pace of
expansion and wish to rest a while before moving ahead. This is essential in several cases where an
intervening phase of consolidation is required before a firm could embark on further expansion
strategies.
Expansion strategies
Expansion strategy is also known as growth strategy, and growth being the way of life, almost all the
organisations plan to expand. Therefore expansion strategies are the most popular corporate strategies. A
growing economy, markets, customers seeking new ways of need satisfaction offer ample opportunities for
companies to seek expansion. Expansion strategy can be categorised into various types
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Expansion through concentration
Expansion through integration
Expansion through diversification
Expansion through cooperation
Expansion through internationalisation
Expansion through concentration: This strategy involves converging resources in one or more firms
businesses in terms of their respective customer needs, customer functions, or alternate technologies. In other
words it is stick to the knitting strategy. Excellent firms tend to rely on doing what they know they are best at
doing. Example bajaj auto
Expansion through integration: Integration basically means combining activities related to the present
activities of a firm. Such a combination may be done on the basis of value chain. Integration is an expansion
strategy as its adoption results in the widening in the scope of the business. It involves doing something
different from what the firm has been doing previously. Integration strategy can further be divided into vertical
integration and horizontal integration.
Expansion through diversification: Diversification means adding new lines of business. The new lines of
business may be related to the current business or may be quite unrelated. Diversification may involve internal
or external, horizontal or vertical dimensions.e.g wipro, tata, hul. Diversification strategy is further of two type‟s
viz concentric diversification and conglomerate diversification.
Expansion through cooperation: corporate strategy could take into account the possibility of mutual
cooperation with competitors while competing with them at the same time, so that the market potential could
expand. The term‟ co-opetition‟ expresses the idea of simultaneous competition and cooperation among rival
firms at the same time. Cooperative strategies could be of the following types:
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Mergers
Takeovers(or acquisitions)
Joint ventures
Strategic alliances
Expansion through internalisation: international strategies are a type of expansion strategies that require
firms to market their products or services beyond the domestic or national market. For doing so a firm has to
assess the international environment, evaluate its own capabilities and so on.
Retrenchment strategy: retrenchment strategy also known as defensive strategy, involves contraction of the
scope or level of business or function. In some cases it amounts to redefinition of the business. In other words
we can say retrenchment involves a total or partial withdrawal from either a customer group,, customer function,
or alternate technologies in one or more firm‟s businesses.
Retrenchment strategy can be divided into following categories
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Turnaround strategy
Divestment strategy
Liquidation strategy
CHAPTER 6
Strategic analysis and choice
Corporate level strategic analysis: The analysis focuses on the question of what should a corporate entity do
regarding the several businesses that are there in its portfolio. The strategic alternatives here are basically
the grand strategies of stability, expansion, retrenchment, and combination strategies. It is to be noted that
corporate level strategic analysis is relevant to the case of a diversified corporation which has several
businesses.
Factors in strategic choice: As we all know strategic decision making is a complex activity. No one set of
factors can be sufficient for exercising a strategic choice. However following are the five factors which
have been identified for making strategic decisions.
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Considerations for government policies
Commitment to past strategic actions
Strategist‟s decision styles and attitude to risk
Internal political consideration
Timing and competitors considerations
CHAPTER 7
Strategy implementation
A good strategy by itself does not ensure success. The success depends, to a large extent, on how it is
implemented. Many strategists fail to produce the desired results because of the failure in properly
implementing the strategy. There is fundamental difference between strategy formulation and strategy
implementation. Strategy formulation is largely an intellectual process, whereas strategy implementation is more
operational in character. Strategy formulation requires good conceptual, integrative and analytical skills but
strategy implementation requires special skills in motivating and managing others.
Steps in strategy implementation:
Corporate strategy -------->sbu objectives------->SWOT analysis of sbu--------------->strategic alt and choice---------->implementation--------------->evaluation and control.
Organisational structure in strategy implementation: Effective implementation of strategy requires the right
organisation structure. Structure is “the division of tasks for efficiency and clarity of purpose, and coordination
between the interdependent parts of the organisation to ensure organisational effectiveness. Structure balances
the need for specialisation with the need for integration. It provides a formal means of decentralising and
centralising consistent with the organisational and control needs of the strategy”
Structure depends on a number of factors like the size of business, nature of the business like the diversity,
characteristics of the market, characteristics of the strategy, future plans etc
Strategy change may necessitate change in the structure.
The influence of strategy on structure may be expressed as follows
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Strategy determines organisational tasks
Strategy influences the choice of the technology and the people responsible for accomplishment of
those tasks and these, in turn, influence the appropriate structure
Strategy determines the specific environment within which the organisation will operate.
Leadership implementation: The role of appropriate leadership in strategic success is highly significant. It has
repeatedly been observed that leadership plays a critical role in the success and failure of an enterprise and
therefore has been considered one of the most important elements affecting organisational performance.
In other words we can say leadership implementation refers to ensuring right people in positions responsible for
implementation of the strategy. It encompasses the chief executive officer and the key managers.
The ability, integrity and commitment of the CEO and other top executives are very critical to the
successful implementation of the strategy
Corporate culture and strategy implementation: The phenomenon which often distinguishes good
organisation from bad ones could be summed up as “corporate culture”. The well managed organisations
apparently have distinctive cultures that are, in some ways, responsible for their ability to successfully
implement strategies. Therefore managerial behaviour arising out of corporate culture, can either facilitate or
obstruct the smooth implementation of strategy.
The strategists have four ways to create a strategy-supportive culture
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To ignore corporate culture
To adapt strategy implementation to suit corporate culture
To change the corporate culture to suit strategic requirements
To change the strategy to fit the corporate culture
CHAPTER 8
Strategy evaluation
The purpose of strategic evaluation is to evaluate the effectiveness of strategy in achieving organisational
objectives. Thus, strategic evaluation and control could be defined as the process of determining the
effectiveness of a given strategy in achieving the organisational goals and taking corrective measures wherever
required.
Strategic control: There is a considerable gap between the time when a strategy is formulated and the time when
it is implemented. The process of implementation in itself is time consuming. During this intervening period
there is a possibility that the assumptions made while formulating a strategy will not remain valid or at least are
no longer relevant. Therefore strategic control takes in account the changing assumptions that determine a
strategy, continually evaluate the strategy as it is being implemented, and take steps to adjust the strategy to the
new requirements.
The four basic types of strategic controls are as follows
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Premise control
Implementation control
Strategic surveillance
Special alert control
Operational control: Operational control is aimed at the allocation and use of organisational resources
through an evaluation of the performance of organisational units such as divisions, SBU‟s and so on, to
assess their contribution to the achievement of organisational objectives. Therefore we can say
operational control system guide monitor and evaluate progress in meeting annual objectives.
The operational control system involves the following steps
 Establishing criteria and standards
 Measuring and comparing performance
 Analysing variances
 Taking corrective measures
Techniques of strategic evaluation and control: It is necessary for a strategist to have an idea about the
techniques of strategic evaluation and control in order to make a choice from among the available and to use
those. Following is the brief description of techniques used in strategic control and strategic evaluation
Techniques for strategic control could be classified into two groups on the basis of the type of environment
faced by the organisations. The organisations that operate in a relatively stable environment may use strategic
momentum control, while those which face a relatively turbulent environment may find strategic leap control
more appropriate
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Strategic momentum control: This type of technique is aimed at assuring that the assumptions on the
basis of which strategies were formulated are still valid and finding out what needs to be done in order
to allow the organisation to maintain its existing strategic momentum.
Strategic leap control: Where the environment is relatively unstable, organisations are required to make
strategic leaps in order to make significant changes. Strategic leap control can assist such organisations
by helping to define the new strategies requirements and to cope with the new environmental realities.
Role of organisational systems in evaluation: Following are the six organisational systems and their roles.
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Information system: Evaluation is done by comparing actual performance with standards. The
measurement of performance is done on the basis of reports generated through the information system.
In fact the purpose of the information management system is to enable managers to keep track of the
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performance through control reports. Techniques such as data warehousing and data mining enable
organisations to dwell deeper into their internal systems and come up with information that can be
useful for evaluation and control purposes.
Control system: The control system is at the heart of any evaluation process. It is used for setting
standards, measuring performance, analysing variances and taking corrective measures.
Appraisal system: As the name suggests appraisal system actually evaluates performance and so is part
of wider control system. When the performance of the manager is appraised, it is their contribution to
the organisational objective which is sought to be measured.
Motivation system: The major role of the motivation system is to induce strategically desirable
behaviour so that managers are encouraged to work towards the achievement of organisational
objectives. The motivation system plays significant role in ensuring that deviations do not occur and if
they do then they are corrected by the means of rewards and penalties.
Development system: The development system prepares the managers for performing strategic and
operational tasks. The most important is to match a person with the job to be performed.
Planning system: In the planning system we deal with the issues of „planning for evaluation‟. Questions
such are these are to be dealt with: who will perform evaluation? How will the information generated
be used? How much resources will be required? What administrative systems will be required to
support the evaluation system and so on.
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