BBA|mantra`s

Strategic
Management
MINI-TEXTBOOK FOR ALL MANAGEMENT STUDENTS

Copyright Notice:

© 2016|BBA|mantra|All rights Reserved

Author: Vikas Choudhary

All rights reserved. This book or any portion thereof

may not be reproduced or used in any manner whatsoever
without the express written permission of the publisher
except for the use of brief quotations in a book review.

For permission requests, email contact@bbamantra.com

Disclaimer:

The information provided within this eBook is for general informational purposes only. While we try to keep
the information up-to-date and correct, there are no representations or warranties, express or implied, about
the completeness, accuracy, reliability, suitability or availability with respect to the information, products,
services, or related graphics contained in this eBook for any purpose. Any use of this information is at your
own risk. No part of this eBook may be reproduced or transmitted in any form or by any means, electronic or
mechanical, including photocopying, recording or by any information storage and retrieval system, without
written permission from the author.

www.bbamantra.com
 INTRODUCTION TO STRATEGIC MANAGEMENT

What is Strategy?

Strategy comes from a Greek word "strategos" which means generalship i.e. art of the
general.

A strategy could be-

 A plan or course of action or a set of decisions making a pattern or creating a

common thread.

 A pattern or a common thread derived from the policies goals and objectives of an
organization.

 The activities that move an organization from its current state to desired future
state.

 The resources necessary for implementing a plan or following a course of action.

Prof. Henry Mintzberg distinguished between intended and emergent strategies. Intended
strategies refer to the plans that managers develop while emergent strategies are the
actions that take place over a period of time.

It is simply the means to achieve objectives. A strategy has the following components -

 It includes clear set of long term goals.

 it defines the scope of the firm(type of products)

 It is a statement of competitive advantage.

 It represents a firm`s internal activities which will allow it to achieve competitive

advantage in the industry.

Therefore strategy is a large scale future oriented plan used to interact with competitive
environment to achieve objectives. It provides a framework for managerial decisions. it
reflects company`s awareness of the main elements of competition.
 STRATEGIC MANAGEMENT

Strategic management is an art and science of formulating, implementing and evaluating

cross functional decisions that enable an organization to achieve its objectives.

Strategic management is a set of managerial decisions and actions that determine the long
term performance of a corporation.it includes: environment scanning, strategy formulation,
strategy implementation, evaluation and control.

It integrates marketing, production/operations, R&D, MIS, finance etc. to achieve

organizational success.

DIMENSIONS OF STRATEGIC DECIONS

1. Strategic issues require top management decisions.

2. Strategic issues involve the allocation of large amount of company`s resources.

3. Strategic issues are likely to have a significant impact on the long term prosperity of
the firm.

4. Strategic issues are future oriented.

5. Strategic issues usually have major multi-functional or multi-business consequences.

6. Strategic issues necessitate consideration of factors in the firm’s external

environment.

LEVELS OF STRATEGY

CORPORATE LEVEL- Board of Director, CEO, Administration and management.

BUSINESS LEVEL - Business and corporate managers, SBU

FUNCTIONAL LEVEL - Product managers, geographic and functional level managers.

SBU (Strategic business unit) – It is any part of the organization which is operated separately
for strategic management purposes.

SBA (Strategic business area) - A distinctive segment of the external environment in which
the firm operates.
 ELEMENTS IN STRATEGIC MANAGEMENT PROCESS

A. D.
B. C.
Establishing the Performing
Formulation Implementation of strategic
hierarchy of
of strategies strategies evaluation and
strategic intent
control

A. Establishing the hierarchy of strategic intent -

1. Creating and communicating a vision.

2. Designing a mission statement.

3. Defining the business.

4. Adopting the business model.

5. Setting objectives.

B. Formulation of strategies -

1. Performing environmental appraisal

2. Doing organizational appraisal

3. Formulating corporate level strategies

4. Formulating business level strategies

5. Undertaking strategic analysis

6. Exercising strategic choice

7. Preparing a strategic plan

C. Implementation of strategies -

1. Activating strategies

2. Designing the structure, systems and processes.

3. Managing behavioral implementation

4. Managing functional implementation

5. Operationalizing strategies

D. Performing strategic evaluation and control -

1. Performing strategic evaluation

2. Exercising strategic control

3. Reformulating strategies
 MODEL OF STRATEGIC MANAGEMENT PROCESS

STRATEGIC
INTENT

STRATEGY
FORMULATION
STRATEGIC
EVALUATION
AND CONTROL
STRATEGIC
IMPLEMENTATION

1. STRATEGIC INTENT-

It involves establishment of hierarchy of strategic intent. This includes formulation of the

following-

Vision-what an organization wishes to achieve in the long run

Mission-it states the role an organization plays in the society

Business definition-it explains the business in terms of customer group, customer function
and alternative technologies

Business model-it clarifies how the business will make revenue

Objective-what is to be achieved? It serves as a yardstick for measuring performance.

2. STRATEGY FORMULATION -

It involves organizational appraisal and environmental appraisal to identify strengths,

weakness, opportunity and threat of the organization. SWOT analysis is conducted to
capitalize on strengths and opportunities, minimize weakness and neutralize threats.
Formulation of strategy takes place at four levels. At corporate level it deals with decisions
regarding management of portfolio of business .at business level it aims at developing
competitive advantage in individual business units. Then decisions at functional level and
operational level are taken.

Strategic alternatives and choice – Alternative plans are required to select the best strategy
out of many possible options, the most appropriate strategy in the light of SWOT is selected
which leads to a strategic plan.

3. STRATEGIC IMPLEMENTATION -

A strategic plan is put to action by six sub-processes. They are-

 Project implementation- It deals with setting up of an organization

 Procedural implementation- It deals with different aspects of regulatory framework
within which the organization operates
 Resource allocation- It procurement and commitment of resources for
implementation
 Structural implementation- It refers to design of appropriate organization structure
and systems, and reorganizing to meet the needs of strategy
 Functional implementation- It includes policies to be formulated in different
functional areas
 Operational implementation- It involves plans regarding productivity, process,
people and pace
 Behavioral implementation- It refers to leadership styles for implementation of
strategy and issues like corporate culture, politics, use of power, personal values,
ethics, CSR.

3. STRATEGIC EVALUATION AND CONTROL -

It involves measurement of organizational performance. A feedback system is setup and key

performance indicators are determined. Feedback from strategic evaluation helps in
exercising control over the strategy and reformulate strategies as and when necessary.
 Vision

Vision serves the purpose of stating what an organization wishes to achieve in the long run.

According to Kotler "It is a description of something (an org, corporate culture, business,
technology, and act) in the future.

According to miller and dress "Vision is category of intentions that are broad, all inclusive
and forward thinking."

There are two components of vision-

Core ideology – It rests on core values and core purpose.it defines the enduring character of
an organization that remains unchanged.

Envisioned future - It is a long term audacious goal and a vivid description of achievement
i.e. what an org will be in the future

Advantages of a good vision -

1. A good vision is inspiring and exhilarating

2. It helps in creation of common identity and shared sense of purpose

3. Vision is competitive, original and unique

4. It fosters risk taking and experimentation

5. It fosters long term thinking

6. It represents integrity

Vision is used to convey what they stand for and what principles guide them to make
strategic dictions.
 MISSION

According to David F. Harvey “A mission provides the basis of awareness of a sense of

purpose, the competitive environment, degree to which the firm’s mission fits its
capabilities and the opportunity which the government offers.

According to Hynger "It is the purpose or reason for organizations existence"

A mission states the role an organization plays in the society.

Nature of a Mission -

1. It gives social reasoning i.e. specifies the role an org plays in the society

2. It is philosophical and visionary i.e. it relates to top management values and has a
long term perspective.

3. It legitimizes social existence

4. It is stylistic objectives i.e. it reflects corporate philosophy, identity, character and

image of an organization

Characteristics of a Mission -

 It should be feasible

 It should be precise

 It should be clear

 It should be motivating

 It should be distinctive

 It should have a societal linkage.

 It should indicate major components of strategy

 It should indicate how objectives are to be accomplished

 It must be dynamic
Example of a good mission statement

Eg. India Today "the complete new magazine"

Ranbaxy Industries “to become a research based international pharmaceuticals company"

Formulation and communication of mission statements –

It is formulated from the following sources:

 National priorities projected in plan documents and industrial policy statements

 Corporate philosophy as developed over the years

 Major strategists have a vision to develop mission statements

 The services of a consultant may be hired

 It is communicated through annual reports, posters, employee manuals, company

information kits, word of mouth publicity, seminars and workshops, newsletters and
advertisements.
 BUSINESS DEFINITION
A business definition explains the business of an organization in terms of customer needs,
customer groups and alternative technologies. It provides answers to the following
questions-

What is our business?

What will it be?

What should it be?

Customer groups are created according to the identity of customers.

Customer functions are based on provision of goods/services to customers.

Alternative technologies describe different ways in which a particular function can be

performed for a customer.

It helps in identifying strategic choices. It helps in diversification and mergers. It also helps
to achieve synergic advantage.

OBJECTIVE SETTING
A Goal denotes what an organization hopes to accomplish in a future period of time and
therefore are qualitative in nature.

Objectives are the ends that state specifically how the goals shall be achieved therefore they
are quantitative in nature.

Objectives refer to the end results which are to be accomplished by an organization through
their plan or strategy over a specific period of time.

Need to establish Objectives

1. It provides a yardstick to measure performance

2. It serves as a motivating force- people work to achieve objectives

 3. It helps to pursue organization`s vision and mission

4. It defines the relationship between the firm`s internal and external environment.

5. It provides basis for decision making-All decisions are aimed towards

accomplishment of objectives

6. It provides standards for performance appraisal

Characteristics of objectives

1. It must be understandable

2. It should be concrete and specific

3. It should be related to a time frame

4. It should be measurable and controllable

5. Different objectives must correlate with each other

6. It must be set within constraints

There are four factors identified by Gluck which must be considered while setting
objectives. They are:

 Forces of the environment

 Realities of an enterprise`s resources and internal power relations

 Values of the top executives

 Awareness of past objectives by the management

Issues in objective setting

 Multiplicity - It deals with different number and different types of objectives w.r.t.
organizational level (higher/lower), ends (survival/growth), functions
(marketing/finance) and nature (organizational/personal).

 Periodicity - Objectives can be long-term or short-term.

 Verifiability - Each objective is tested on the basis of its verifiability.

 Reality - Objectives can be official and operative. Official objectives are those which
an organization professes to attain while operative objectives are those which an
organization seeks to attain in reality.

 Quality - Objectives can be good or bad on the basis of its capability to provide
specific direction and tangible basis for measuring performance.

 Specifically - Objectives may be stated at different levels of specificity. Example at

macro level as goals and as target at the micro level.
 ENVIRONMENTAL AND ORGANIZATIONAL APPRAISAL

Environment is anything and everything surrounding us. It consists of the living and
nonliving things around us.

Characteristics of environment

 It is complex - It consists of many interrelated factors

 It is dynamic - Due to its shape and character

 It is multifaceted - The environment developed is perceived differently by different

people

 It has a far reaching compact - The growth and profitability of the organization
critically depends upon its environment.

Components of environment

Internal or micro environment External or macro environment

Customers Economic environment

Suppliers Demographic environment

Organization Technological environment

Competition Legal and political environment

Market - cost structure ,price sensitivity,

distribution system, technology, market
stability Socio-cultural environment

Intermediaries Global/International environment

 ENVIRONMENTAL SCANNING

It is the process by which an organization monitors the relevant environment the identify
opportunities and threats affecting the business for the purpose of making strategic
decisions.

Factors to be considered while conducting an environmental appraisal -

 Events - Important and specific occurring taking place in different environment

sectors

 Trends - General tendencies or course of action around which events and trends
take place.

 Issues - Current concern that arise or respond to events and trends

 Expectations - Demand which are made by interested group in the light of current
issue

Approach’s to environmental scanning

1. Systematic approach - In this approach information for environmental scanning is

collected systematically. Information related to markets and customers, change in
legislation and regulations etc. have a direct impact on the business therefore it is
continually monitored for relevant facts. This approach is beneficial for strategic
management and operational activities.

2. Ad-hock approach -An organization may conduct a special survey related to specific
environmental issues from time to time... such studies may be undertaken when an
organization has to take up new projects or update existing strategies. Changes and
unforeseen developments may be investigated which affect the organization

3. Processed form approach-The organization under this approach uses information in

a processed form available from both internal and external environment.eg.
Information supplied by government agencies, private institutions, it uses secondary
data method.
Sources of information for environment scanning

 Secondary sources of information- newspapers,magazines,journals,documentaries

 Mass media- radio, TV. , internet

 Internal sources- Internal files , documents, reports ,records , database

 External agencies-Customers, market intermediaries, suppliers, retailers etc.

 Spying and surveillance- through ex-employees of competitors, industrial espionage,

planting a mole in rival company.

Factors affecting environmental appraisal

1. Strategist related factors - Since strategist play a central role in formulation of

strategies ,there characteristics such as age, education, experience, motivation,
cognitive styles ,ability to withstand time pressure and responsibility have an impact
to the extent to which they are able to appraise the environment.

2. Organization related factors - Characteristics of the organization which affect the

environment are nature of the business, its age, size, complexity, nature of it market,
product or service that it provides.

3. Environment related factors - The nature of environment faced by the organization

determines how its appraisal could be done. The nature of the environment depends
upon its complexity, volatility, hostility and diversity.
 TECHNIQUES FOR ENVIRONMENTAL SCANNING

A. SWOT analysis

It was developed in 1960`s at Stanford research institute. IT is a strategic management

technique to understand the internal and external environment of an organization in terms
of its strengths, weaknesses, opportunities and threats.

There are three steps-

 Setting the objectives of the organization

 Identifying the strengths ,weaknesses ,opportunities and threats of the organization

 Answering the 4 major question-

How to maximize the internal strengths of the organization?

How to minimize the internal weaknesses of the organization?

How to protect the organization from threats in the external environment?

How to capitalize on opportunities present in the external environment of

the organization?

Advantages of SWOT Analysis Disadvantages of SWOT Analysis

Realities may be more complex than

It is simple to use represented by swat matrix due to
simplicity of use

It may result in compiling of lists rather

Low cost is involved
than focus on organizational objectives

The evaluator may be biased towards a

It is flexible and can be adapted to
view-point and may miss-interpret the
varying situations
situation

It leads to clarification of issues and is

Strengths can be confused with
useful as a starting point for strategic
opportunities
analysis

It helps in development of goal

oriented objectives
 B. ETOP analysis

Environment threat and opportunity profile - It is a technique to structure the environment.

It was developed by glueck.

The preparation of ETOP involves dividing the environment into different sectors and then
analyzing the impact of each sector on the organization. A comprehensive ETOP requires
sub dividing each environmental sector into subsectors and then the impact of each sector
is described in the form of a statement. A summary of ETOP may only show the major
factors for the sake of simplicity.

The strategic managers must keep focus on the following dimensions-

 Issue selection-there is a likelihood of arriving at incorrect priorities therefore focus

must be on the issues which have been selected.

 Accuracy of ETOP- the data must be collected from good sources otherwise the
entire process of environmental scanning might go to waste

 Impact study- It should be conducted focusing on the various opportunities and

threats and the critical issues selected. Efforts must be made to make the
assessment more objective.

 Flexibility of operations-Due to uncertainty in business situations, a company will be

benefited by devising a proactive and flexible strategies in their plans, structures,
strategy etc. An optimum level must be reached.

C. ANSOFF Product Market Growth Matrix

It is a tool that helps a business decide their product and market growth strategy. It suggests
that a business attempts to grow depending upon whether it makes a new or existing
product in a new or existing market. The output of the matrix is a series of suggested growth
strategies that set the direction for the business strategy.
The four business strategies that can be adopted by a business based upon the ANSOFF
matrix are-

1. Market penetration- It is a growth strategy where the business focuses on selling

existing products into existing markets. It has four main objectives-

 Maintain or increase the market share of current product -through competitive

pricing, advertising and selling promotion

 Secure dominance of growing markets

 Restructure a mature market by driving out competitors

 Increasing usage by existing customers - through loyalty programs

2. Market development - It is a business strategy where the business seeks to sell its
existing products into new markets. There are many ways of approaching a new market
or markets-

 New geographic market-exporting to new countries

 New product dimension or packaging

 New distribution channel

 Create new market segments

 Different pricing policies to attract different customers

3. Product development - It is a strategy where a business markets new products in

existing markets .it requires development of new competencies and development of
modified products which can appeal to existing markets.

4. Diversification - Under this strategy the business markets new products in new
markets.it is a risky strategy as the business is moving into markets where it has little or
no expertise. For a business to adopt this strategy it must have a clear idea about what it
expects to gain from the strategy and honest assessment of risks.
 D. BCG-Boston consultancy group growth share Matrix

It is a famous portfolio analysis technique developed by Boston consultancy group in the

1970`s for managing portfolio of different business units. Large companies to be organized
in SBU`s face a challenge of allocation resources among these units .It shows various
business units on a graph of market growth v/s market share relative to competitors.
Resources are allocated to business units according to where they are situated on the graph.

 Cash cows - It is a business unit with large market share in a mature and slow
growing industry. A Cash cow requires little investment and generates huge cash
which can be used to invest in other business units.

 Star - It is a business unit that has a large market share in a fast growing industry. It
may generate cash but due to rapid growing market it requires investment to
maintain its needs.

 Question mark? - It is also called the problem child. It is a business unit which has a
small market share in a high growth market. It requires investment to grow market
share but whether it will be a star or not is unknown.

 Dogs - A business unit with a small market share in a mature industry .A dog may not
require substantial cash but it ties up capital that could be invested elsewhere.
Unless a dog has some special strategic purpose it should be liquidated if there is
little prospect to main market share.

The BCG matrix provides a framework for allocating resources among different business
units and allows the strategic planner to compare many business units at a glance.
 GENERIC BUSINESS STRATEGIES

A. Cost leadership - When the competitive advantage of a company lies in its lower
costs of products and services relative to what their competitors have to offer. It
offers a margin of flexibility to firms to lower prices if the competition becomes stiff
and yet earn more or less the same level of profit.

Ways to achieve cost leadership -

 accurate demand forecasting and high capacity utilization

 attain high economies of scale

 standardization of products and services

 aiming at the average consumer

 investing in cost saving techniques

Conditions in which cost leadership exists -

 price based competition in the market

 products/services offered are of standardized quality

 buyers possess the bargaining power to negotiate price reduction from the suppliers

 less customer loyalty

 less switching cost

 few ways available for differentiation

Benefits -

 cost advantage helps to protect from competition

 threat of cheap substitutes can be offset by lowering prices

 cost advantage acts as barrier to new entrants

 powerful suppliers possess high bargaining power i.e. power to negotiate price
increase from inputs

 powerful buyers possess high bargaining power to effect price reduction

Risks -

 Cost advantage is temporary

 it is not a market friendly approach

 less efficient producers may not choose to remain in the market owing to dominance
in competition

 threat of technological shifts

B. Differentiation - When the competitive advantage of a firm lies in special features

incorporated into the product/service, which are demanded by customers who are
willing to pay for it.

Achieving differentiation - Incorporate features that offer-

 Utility for customers and match their taste and preferences

 Raise the performance of the product

 Increase buyer satisfaction

 offer promise for high quality

 Enable a customer to claim distinctiveness from other customers and enhance their
status
Conditions for achieving differentiation -

 The market is too large to be catered by few organizations selling standardized

products

 Customers’ needs and preferences are too large to be satisfied by a standardized

product

 It is possible for an organization to charge premium prices for differentiation

 There is scope for increasing production on the basis of this strategy

Benefits -

 Competitive rivalry is less as firms can distinguish themselves on the basis of

differentiation

 Powerful suppliers can negotiate price increase that the firm can absorb due to its
loyal customers

 Powerful buyers do not negotiate prices due to fewer options

 Acts as a barrier to new entrants

Risks -

 Long-term perceived uniqueness is difficult to maintain

 there may be several differentiators

 It fails if the attribute is not valued by the customer

 Price premium has a limit

 Failure of organization to communicate the benefit associated with the product

 C. Focus Business Strategy - It relies on cost leadership or differentiation but cater a
niche or narrow market. It is employed for identifying customer groups on the basis
of demographic characteristics and geographic segmentation.

Ways of achieving -

 Choosing niches by identifying gaps not covered by cost leaders or differentiators

 Creating superior skills to cater such market

 Creating superior efficiency for serving such market

 Achieving lower cost/differentiation as compared to competitors

 Developing innovative ways to manage value chain

Conditions -

 There is some type of uniqueness in the segment

 There are specialized requirements for using the product/service that common
customers cannot fulfill

 Niche market is big enough to be profitable

 Major players of the industry are not interested in such niche market

 Focusing firm has the necessary skills and expertise to serve the segment

Benefits -

 Buyers buy in small quantities therefore powerful suppliers have a low interest

 Buyers are less likely to shift loyalty

 Specialization acts as a barrier to new entrants and substitute products

Risks -

 Being focused means to commit to a narrow market

 Have to develop distinctive competencies

 Niche are short lived

 Niche may be attractive to big players

 Rival may serve the niche market in a better manner

 Costs are higher due to limited markets and small volume of production and sales
PORTFOLIO ANALYSIS – It refers to a set of techniques that help an organization in making
strategic decisions with respect to individual business or products in its portfolio. It views an
organization as a basket or portfolio of products or business units to be managed for the
best possible returns. It involves-

 Identifying individual SBU`s growth cycle stages

 Examining these business units in the context of overall growth of industry

 Optimizing resources and maximizing overall portfolio performance

Components of Portfolio Analysis -

 Risk aversion

 Analyzing returns

 Determining dispersion of returns

 Value maximization

 Sufficiency

Benefits -

 It helps to simplify complex situations and provides an overview of strengths,

weaknesses, opportunities and threats of product or business units

 It increases the overall returns of shareholders

 It helps in diversification and identifying risks in corporate portfolio

 It helps in overcoming danger of bias decisions

 It integrates corporate strategy with individual business strategy.

Limitations -

 It relies heavily on future estimates

 It leads to frequent and expensive switches of company resources.

 Acquiring or disinvesting in a business is complex and time consuming

 Market share is not same as profitability

 There may be other places to put money than cash cows

 It does not consider synergies existing in the Industry

 STRATEGIC CHOICE

Strategic choice refers to the decision which determines the future strategy of a firm. It
addresses the question the question "Where shall we go". A SWOT analysis must be carried
out.

Strategic choice is the decision to select from among the grand strategies considered, the
strategy which will best meet the enterprise objectives. The decision involves- focusing on
few alternatives, considering the selection factors, evaluating the alternatives against these
criteria and making the actual choice.

Factors affecting strategic choice –

 Environmental constraints

 Internal organizations and management power relationships

 Values and preferences

 attitude towards risk

 Impact of past strategy

 Time constraints- time pressure, frame horizon ,timing of decision

 Information constraints

 Competitors reaction
Process of Strategic choice

1. Focusing on alternatives-Aim is to narrow down the choice to a manageable number

of feasible strategies. It can be done by visualizing a future state and working
backwards from it. It can be done through GAP analysis.

At Corporate level strategic alternatives are -Expansion, Stability,

Retrenchment, Combination

At Business level strategic alternatives are - Cost leadership, Differentiation

or Focused business strategy.

By reverting to business definition it helps to think in a structured manner along any one
or more dimensions.

2. Analyzing the strategic alternatives- The alternatives have to be subjected to a

thorough analysis which rely on certain factors known as selection factors. They
determine the criteria on the basis of which the evaluation will take place.

Objective factors- these are based on analytical techniques and are hard
facts used to facilitate strategic choice.

Subjective factors -these are based on one`s personal judgment, collective or

descriptive factors.

3. Evaluation of strategies- Each factor is evaluated for its capability to help the
organization to achieve its objectives. It involves bringing together analysis carried
out on the basis of subjective and objective factors. Successive iterative steps of
analyzing different alternatives lie at the heart of such evaluation.

4. Making a strategic choice- A strategic choice must lead to a clear assessment of

alternative which is the most suitable alternative under the existing conditions. A
blueprint has to be made that will describe the strategies and conditions under
which it operates. Contingency strategies must be also devised.
 STRATEGIC EVALUATION AND CONTROL

It is the process of determining the effectiveness of a given strategy in achieving the

organizational objectives and taking corrective actions whenever required.

Importance -

 there is a need for feedback ,appraisal and reward

 to check on the validity of strategic choice

 Congruence between decisions and intended strategy

 Creating inputs for new strategic planning

Control –

It can be exercised through formulation of contingency strategies and a crisis management

team. There can be the following types of control -

 Operational control - It is aimed at allocation and use of organizational resources

through evaluation of performance of organizational units, divisions, SBU`s to assess
their contribution in achieving organizational objectives.

 Strategic control - It takes into account the changing assumptions that determine a
strategy, continually evaluate the strategy as it is being implemented and take the
necessary steps to adjust the strategy to the new requirements.

The four basic type of strategic control are -

1. Premise control - It identifies the key assumptions and keeps track of any change in
them to assess its impact on strategy and implementation. The goal is to find if the
assumptions are still valid or not .It is generally handled by the corporate planning
staff considering the environmental and organizational factors.

2. Implementation control- It includes evaluating plans, programs, projects, to see if

they guide the organization to achieve predetermined organizational objectives or
not. It leads to strategic rethinking .It consists of identification and monitoring of
strategic thrusts.
 3. Strategic surveillance- It aims at generalized control. It is designed to monitor a
broad range of events inside and outside the organization that are likely to threaten
the course of the firm. Organizational learning and knowledge management systems
capture the information for strategic surveillance.

4. Special Alert control- It is a rapid response or immediate reassessment of strategy in

the light of sudden and unexpected events. It can be exercised through formulation
of contingency strategies and a crisis management team.

Strategic Evaluation Process

1. Setting standards of performance - It must focus on questions like -

 What standards should be set?
 How should the standards be set?
 In what terms should these standards be expressed?

The firm must identify the areas of operational efficiency in terms of people, processes,
productivity and pace. Standards set must be related to key management tasks .the special
requirement for performance of these task must be studied. It can be expresses in terms of
performance indicators.

The criteria for setting standards may be qualitative or quantitative. Therefore standards
can be set keeping in mind past achievements, compare performance with industry average
or major competitors. Factors such as capabilities of a firm, core competencies, risk bearing
ability, strategic clarity and flexibility and workability must be considered.

2. Measurement of performance- Standards of performance act as a benchmark in

evaluating the actual performance. Operationally it is done through accounting, reporting
and communication system. The key areas which must be kept in mind are - difficulty in
measurement, timing of measurement (critical points) and periodicity in measurement (task
schedule).
3. Analyzing variances- The two main tasks are noting deviations and finding the cause of
deviations.

When actual performance is equal to budgeted performance tolerance limits must be set.
When actual performance is greater than budgeted performance we check the validity of
standards and efficiency of management. When actual performance is less than budgeted
performance we must pinpoint the areas where performance is low and take corrective
action,

The cause of deviations may be -

 External or internal?

 Random or expected?

 Temporary or permanent?

 Are the strategies still valid?

 Does the organization have the capacity to respond to the changes needed?

4. Taking corrective actions - It consists of the following-

 Checking of performance-It includes in-depth analysis and diagnosis of the factors

that might be responsible for bad performance.

 Checking of standards- It results in lowering or elevation of standards according to

the conditions.

 Reformulate strategies, plans, objectives- giving a fresh start to the strategic

management process
 STRATEGIC LEADERSHIP

Strategic managers manage the strategic management process designed to help the
organization to achieve its objectives. Strategic leadership is the ability to lead an
organization towards achievement of its objective. The tasks involved are-

 Anticipate

 Envision

 Maintain flexibility

 Empower others to create change

The task of strategic leadership changes with different levels in the organization-

At corporate level - It lies with the CEO`s, Senior executive, President

At business level - It lies with the General Manager or the vice president

At functional level – It lies with the functional managers such as marketing manager, HR
manager etc.

At operational level - It lies with the deputy or assistant manager. They are responsible for
the implementation of strategy.

Tasks of a strategic leader

 Determining strategic direction

 Efficiently managing the organizational resource portfolio

 Sustaining an effective organizational culture

 Emphasizing on ethical practices

 Establishing balanced organizational control