Introduction To Strategic Management Concepts

Introduction to Strategic Management
Concepts
1
Faculty of Management and Commerce ©M. S. Ramaiah University of Applied Sciences
Introduction to Strategic Management Concepts
At the end of this session, student will be able to:
– Explain the concepts of Strategic Management
– Discuss the Strategic Management Process
– Discuss the benefits of Strategic Management
2
Contents
Introduction to Strategic Management:

– Concept of Strategy
– Nature
– Scope
– Process
– Importance of Strategic Management
3
Strategy
4
Strategic Management
5
Definition
• A plan of action designed to achieve a

long-term or overall aim
• A method or plan chosen to bring
about a desired future, such as
Strategy achievement of a goal or solution to a

problem
6
Concept of Strategy
• Every individual has His/her own strategies throughout their lives:
Examples:
 To get good Grades in tests
 To secure a degree
 To find a good Job
 To build a big house
 To get the children married
 To plan for life after retirement
7
Concept of Strategy Contd..
• Similarly, every business will also have a strategy no matter how
big or small it may be
• Example:
 Make good profit in the coming year
 Hire well qualified employees
 Make another project in the next 3 years
 Increase the market value of the company
 Improvise on the product/service
8
Strategic Management
• “Strategic Management is defined as the set of

decisions and actions that result in the
formulation and implementation of plans
designed to achieve a company’s objectives”
Definition
9
Scope of Strategic Management
1. Formulate the company’s Mission (Broad Statements, Purpose, Philosophy and Goals)
2. Conduct Analysis that reflects the Company's internal conditions
3. Assess the Company’s External Environment
4. Analyze the Company’s opportunities by matching resources with the External

Environment
5. Identify the most desirable opportunity by evaluating each option with the Company’s
Mission
10
Scope of Strategic Management
6.Select a set of long-term objectives and grand strategies that will achieve the most
desirable options
7. Develop annual objectives and strategies
8. Implement the strategic choices by means of budgeted resource allocation
9. Evaluate success of the strategic process as an input for future decision making
11
Scope of Strategic Management (Contd..)
• The above 9 tasks indicates that Strategic Management involves-
 Planning
 Directing
 Organizing
 Controlling
12
Scope of Strategic Management (Contd..)
• A Company’s strategy related decisions and actions
• By strategy, managers mean their large-scale, future-oriented plans

for interacting with the competitive environment to achieve
company objectives
13
Importance of Strategic Management
• Managers must carefully consider their organization’s internal and
external environments to develop strategic plans
• Systematic means of analyzing the environment
• Assessing organization’s strengths and weaknesses
• Identifying opportunities that would give competitive advantage
• Incorporating findings into their planning
• The value of thinking strategically has an important impact on

organization performance
14
Importance of Strategic Management Contd..
“Strategic management is what managers do to develop the

organization’s strategies”
Strategic management involves all four of

the basic management functions—
planning, organizing, leading, and
controlling
15
Reasons Why Strategic Management Is Important
Strategic management has a significant
impact on how well an organization performs
Organizations of all types and sizes must

manage constantly changing situations
Today’s companies are composed of

diverse divisions, units, functions, and
work activities that must be coordinated
Strategic management is involved in many of

the decisions that managers make.
16
Dimensions of Strategic Management
• Strategic issues have the following dimensions:
Requires Top- Requires large amounts Affects Long term

Management Decisions of firm’s Resources prosperity of the Firm
Multifunctional or
Strategic issues are Multi-business
future oriented Consequences
Require Considering
the firm’s external
environment
17
Stages of Strategic Management
Strategy Strategy Strategy Evaluation

Formulation Implementation
18
Stages of Strategic Management
Stage 1: Strategy Formulation-
• Strategy formulation includes developing a vision and mission
• Identifying an organization’s external opportunities and threats
• Determining internal strengths and weaknesses
19
Stages of Strategic Management Contd..
• Establishing long term objectives
• Generating alternative strategies
• Choosing particular strategies to pursue
• Strategy formulation includes:
 Deciding what new business to enter
 What to abandon, how to allocate resources
 Whether to expand operations or diversify
 Whether to enter international markets
20
 whether to merge or form a joint venture and
 how to avoid a hostile takeover
• No organization has unlimited resources, strategists must decide

which alternative strategies will benefit
• Strategy formulation decisions are to specific products, markets,

resources and technologies over an extended period of time
• Strategies determine long term competitive advantage
21
Stage 2: Strategy Implementation-
• Strategy implementation requires a firm to establish annual

objectives, devise policies, motivate employees and allocate
resources so that formulated strategies can be executed
• Strategy implementation includes:
 Developing a strategy- supportive culture
 Creating an effective organizational structure
 Redirecting marketing efforts
22
 Preparing budgets
 Developing and utilizing information systems
 Linking employee compensation to organizational performance
• Strategy implementation Is often called as action stage of strategic

management
• Implementation means mobilizing employees and managers to put

forth formulated strategies into action
• It is often considered as the most difficult stage in strategic

management
23
• It requires personal discipline, commitment and sacrifice
• Strategy implementation hinges upon managers’ ability to motivate

employees
• Strategies formulated but not implemented serve no useful

purpose
24
Stage 3: Strategy Evaluation-
• Strategy evaluation is the final stage
• Managers need to know when particular strategies are not working

well
• Strategy evaluation is the primary means to obtain this information
• All strategies are subject to future modification because internal

and external factors are constantly changing
25
• Three fundamental strategy evaluation activities are:
1. Reviewing external and internal factors that are the basis for
current strategies
2. Measuring performance
3. Taking corrective actions
• Strategy evaluation is required because success today is no

guarantee of success tomorrow
26
• Strategy Formulation, Implementation and Evaluation activities

occur at three hierarchical levels in a large organization:
1. Corporate Level
2. Divisional or Strategic Business Unit Level
3. Functional Level
• By fostering Communication and interaction among employees

across hierarchical levels, strategic management helps a firm
function as a competitive team
27
Benefits of Strategic Management
• Strategic management allows an organization to me more proactive

that reactive in shaping its future
• It allows an organization to initiate and influence activities- exert

control over its destiny
• The principal benefit of strategic management is to help

organizations to formulate better strategies through the use of a
more systematic, logical and rational approach
28
Benefits of Strategic Management Contd..
• Making good strategic decisions is the major responsibility of an

organization’s owner or chief executive officer
• Both managers and employees are involved in strategy formulation,

implementation and evaluation activities
• Benefits of strategic management are:
Financial Benefits Non-Financial Benefits
29
1. Financial Benefits:
• Organizations using strategic management concepts are more

profitable and successful
• Businesses using strategic management concepts show

improvements in sales, profitability, productivity
• High performance firms tend to do systematic planning to prepare

to future fluctuations in their external and internal environments
30
• Firms with planning systems more closely resembling strategic

management theory exhibit superior long term financial
performance relative to their industry
• High performing firms seem to make more informed decisions with

good anticipation of both short and long term consequences
• Firms that perform poorly often engage in activities that are short
sighted and do not reflect good forecasting of future conditions
31
2. Non-Financial Benefits:
Strategic management offers the following Non-Financial Benefits-
• It allows for identification, prioritization and exploitation of

opportunities
• It provides an objective view of managerial problems
• It represents a framework for improved coordination and control of

activities
• It minimizes the effects of adverse conditions and changes
32
• It allows more effective allocation of time and resources to

identified opportunities
• It creates a framework for internal communication
• Helps integrate the behavior of individuals into a total effort
• Provides a basis for clarifying individual responsibilities
• Encourages forward thinking
33
• Provides a cooperative, integrated approach to tackling problems

and opportunities
• Encourages a favorable attitude towards change
• Gives a degree of discipline and formality
34
Reasons why Some Firms Do No Strategic Planning
• Some reasons for poor or no strategic planning are as follows:
– Poor Reward Structures: When an organization assumes

success, it often fails to reward success, When failure occurs,
then the firm may punish. In this situation, it is better for an
individual to do nothing than to risk trying to fail and be
punished
35
Contd..
– Fire-Fighting: An organization can be so deeply embroiled in crisis

management and fire-fighting that it does not have time to plan
– Waste of Time
– Too Expensive
– Laziness
– Content with success
– Fear of failure
36
Contd..
– Overconfidence
– Prior Bad Experience
– Self Interest
– Fear of the Unknown
– Honest Difference of opinion
– Suspicion
37
Pitfalls in Strategic Planning
• Strategic planning is a complex process
• It does not provide a ready to use prescription for success
• Being aware of potential pitfalls and being prepared to address

them is essential to success
38
Pitfalls in Strategic Planning
• Some pitfalls to watch out for and avoid in strategic planning are
provided below:
– Using strategic planning to gain control over decisions and resources
– Doing strategic planning only to satisfy accreditation or regulatory

requirements
– Too hastily moving from mission development to strategy formulation
– Failing to communicate the plan to employees who continue working in the

dark
– Top managers not actively supporting the strategic planning process
39
Pitfalls in Strategic Planning Contd..
– Failing to use plans as a standard for measuring performance
– Delegating plan to a planner rather than involving all managers
– Failing to involve key employees in all phases of planning
– Viewing planning to be unnecessary or unimportant
– Becoming so engrossed in current problems that insufficient or no planning

is done
– Being so formal in planning that flexibility and creativity are muted
40
Summary
• Strategy is a plan of action designed to achieve a long-term or

overall aim
• Strategic Management is the set of decisions and actions that result

in the formulation and implementation of plans designed to
achieve a company’s objectives
• It involves long term, future-oriented, complex decision making and

requires considerable resources
41
Summary Contd..
• The strategic management process consists of three stages,

Strategy Formulation, Implementation and Evaluation
• Benefits of strategic management can be classified into 2 categories

they are Financial Benefits and Non-Financial Benefits
• Some firms do not engage in strategic planning and some firms do

strategic planning but receive no support from managers and
employees
42
Summary Contd..
• Strategic planning is a complex process it does not provide a ready

to use prescription for success, being aware of potential pitfalls and
being prepared to address them is essential to success
43

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Introduction to Strategic Management

At the end of this session, student will be able to:

– Explain the concepts of Strategic Management

– Discuss the Strategic Management Process

– Discuss the benefits of Strategic Management

Introduction to Strategic Management:

– Importance of Strategic Management

• A plan of action designed to achieve a

Strategy achievement of a goal or solution to a

• Every individual has His/her own strategies throughout their lives:

 To get good Grades in tests

 To find a good Job

 To build a big house

 To get the children married

 To plan for life after retirement

 Make good profit in the coming year

 Hire well qualified employees

 Make another project in the next 3 years

 Increase the market value of the company

 Improvise on the product/service

• “Strategic Management is defined as the set of

2. Conduct Analysis that reflects the Company's internal conditions

3. Assess the Company’s External Environment

4. Analyze the Company’s opportunities by matching resources with the External

7. Develop annual objectives and strategies

8. Implement the strategic choices by means of budgeted resource allocation

• A Company’s strategy related decisions and actions

• By strategy, managers mean their large-scale, future-oriented plans

• Systematic means of analyzing the environment

• Assessing organization’s strengths and weaknesses

• Identifying opportunities that would give competitive advantage

• Incorporating findings into their planning

• The value of thinking strategically has an important impact on

“Strategic management is what managers do to develop the

Strategic management involves all four of

Organizations of all types and sizes must

Today’s companies are composed of

Strategic management is involved in many of

• Strategic issues have the following dimensions:

Requires Top- Requires large amounts Affects Long term

Strategy Strategy Strategy Evaluation

Stage 1: Strategy Formulation-

• Strategy formulation includes developing a vision and mission

• Identifying an organization’s external opportunities and threats

• Determining internal strengths and weaknesses

• Establishing long term objectives

• Generating alternative strategies

• Choosing particular strategies to pursue

• Strategy formulation includes:

 Deciding what new business to enter

 What to abandon, how to allocate resources

 Whether to expand operations or diversify

 Whether to enter international markets

 whether to merge or form a joint venture and

 how to avoid a hostile takeover

• No organization has unlimited resources, strategists must decide

• Strategy formulation decisions are to specific products, markets,

• Strategies determine long term competitive advantage

Stage 2: Strategy Implementation-

• Strategy implementation requires a firm to establish annual

• Strategy implementation includes:

 Developing a strategy- supportive culture

 Creating an effective organizational structure