Introduction to Strategic

Management

Dr Prashant Gupta
 21st Century Competitive Landscape
Fundamental nature of
competition is changing
• Rapid technological changes
• Rapid technology diffusions
• Dramatic changes in
information and
communication technologies
• Increasing importance of
knowledge
The pace of change
is relentless....
and increasing
Traditional industry
boundaries are
blurring, such as...
• Computers
• Telecommunications
 21st Century Competitive Landscape

The global economy is Traditional sources of

changing
• People, goods, services and
ideas move freely across
geographic boundaries
• New opportunities emerge
in multiple global markets
• Markets and industries
become more
internationalized
competitive advantage
no longer guarantee
success
New keys to success
include:
• Flexibility
• Innovation
• Speed
• Integration
 Governments Employees

Investors,
Supply Chain
Shareholders and
Associates
Lenders

Private Organizations THE CORPORATION Customers and Users

Local Communities Unions

and Citizens

Joint Venture
Regulatory
partners and
Authorities
Alliances
 Governments

Joint Venture Supply Chain

partners Associates
& Alliances

Investors: Shareowners & Lenders

Employees CORPORATION
Customers Regulatory
& Users Authorities

Unions RESOURCE BASE

Private
Local communities INDUSTRY STRUCTURE Organizations
& Citizens

SOCIAL POLITICAL ARENA

 Strategy
Direction and scope of an organization
over the long term, which achieves
advantage for the organization through its
configuration of resources within a
changing environment in particular its
markets, customers or clients so as to
fulfill stakeholders’ expectations.
 Strategy
 ‘Determination of basic long term goals and
objectives of an enterprise and the adoption
of the courses of action and the allocation of
resources necessary for carrying out these
goals.’
(Chandler)
Defining Strategic Management
 Strategic Management
 the art and science of formulating,

implementing, and evaluating cross-

functional decisions that enable an
organization to achieve its objectives

1-8
Management Decisions
 Strategic (long-term) decisions:
They impact the company’s long-term effectiveness
to address its customers’ needs.
 Tactical (intermediate-term) decisions:
They deal with effective scheduling of resources
like material and labour within the constraints of
previously made strategic decisions.
 Functional Planning and Control (short-term
decisions):
They address day-to-day planning and control.
 Stages of Strategic Management

Strategy Strategy Strategy

Formulation Implementation Evaluation

1-10
 Stages of Strategic Management

 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, and choosing particular
strategies to pursue.
1-11
 Strategy Formulation
 Deciding what new businesses to enter
 What businesses 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
 How to avoid a hostile takeover
1-12
 Stages of Strategic Management

 Strategy Implementation
 requires a firm to establish annual

objectives, devise policies, motivate

employees, and allocate resources so
that formulated strategies can be
executed
 often called the action stage

1-13
 The Vocabulary of Strategy
Term Definition
Vision or Strategic Desired future state: the aspiration of the
Intent organization
Mission Overriding purpose in line with the values or
expectations of stakeholders
Goal General statement of aim or purpose

Objective Quantification (if possible) or more precise

statement of the goal
Unique resources and Resources, processes, or skills which provide
core competencies ‘competitive advantage’
Strategies Long-term direction

Control / Monitor Assess effectiveness of strategies and actions.

Modify strategies and / or actions as and when
necessary
The Strategic-Management Model

Where are we now?

Where do we want to go?

How are we going to get there?

1-15
A Comprehensive Strategic-Management Model

1-16
Guidelines for Effective Strategic Management

1-17
Levels of Strategy
 Corporate – level strategy: Concerned with the
overall purpose and scope of an organization and how
value will be added to different parts (business units) of
the organization.
 Business unit strategy: How to compete successfully
in particular markets.
 Functional / operational strategies: Concerned with
how the component parts of an organization deliver
effectively the corporate and business level strategies in
terms of resources, processes and people.
Ideally, these play together!
Realistically, there’s often conflict!
 Single-Business Firms

Corporate/
Business level

Financial/ Human
POM/R&D Marketing
accounting relations
strategies strategies
strategies strategies
 Multiple Business Firms
Corporate/
Business level

Business 1 Business 2 Business 3

Financial/ Human
POM/R&D Marketing
accounting relations
strategies strategies
strategies strategies
 Hierarchy of Objectives and Strategies

Strategic Decision Makers

Ends Means
Board of Corporate Business Functional
(What is to be (How is it to be Directors Managers Managers Managers
achieved?) achieved?)
Vision,Mission,
including
goals &
philosophy

Long-term
objectives Grand strategy

Short-term
Annual
objectives strategies &
policies

Note: indicates a principal responsibility; indicates a secondary responsibility

 Characteristics of Strategic Management
Decisions

Greater risk, cost, and

profit potential

Corporate
-level Greater need for
decisions flexibility
involve

Longer time horizons

 Characteristics of Strategic Management
Decisions

Bridge decisions at corporate

and functional levels

Business - Are less costly, risky, and

level potentially profitable than
decisions corporate-level decisions

Are more costly, risky, and

potentially profitable than
functional-level decisions
 Characteristics of Strategic Management Decisions

Implement overall strategy

Involve action-oriented
Functional- operational issues
level
decisions Are relatively short range
and low risk

Incur only modest costs

The Leading Edge of Strategy – Fit or Stretch
(Hamel & Prahalad)
Aspect of Environment-Led Resource-Led
strategy ‘Fit’ ‘Stretch’
Underlying basis Strategic fit between Leverage of resources to
of strategy market opportunities and improve value of money
organization’s resources
Competitive ‘Correct’ positioning; Differentiation based on
Advantage Differentiation directed competencies suited to or
through…. by market need creating marketing need
How small players Find and defend a niche Change the rules of the
survive… game
Risk-Reduction Portfolio of products / Portfolio of competencies
through… businesses
Corporate Centre Strategies of business Core competencies
invests in… units or subsidiaries
 Grand Strategies
 Grand Strategies – Integration Strategies:
 Forward Integration :Gaining ownership or increased control over
distributors or retailers
 Backward Integration: Seeking ownership or increased control of a
firm's suppliers
 Horizontal Integration: Seeking ownership or increased control over
competitors
 Grand Strategies – Intensive Strategies:
 Market Penetration: Seeking increased market share for present
products or services in present markets through greater marketing
efforts
 Market Development: Introducing present products or services into
new geographic area
 Product Development: Seeking increased sales by improving present
products or services or developing new ones
 Grand Strategies
 Grand Strategies – Diversification Strategies:
 Concentric Diversification: Adding new, but related, products or
services
 Horizontal Diversification: Adding new, unrelated products or services
for present customers
 Conglomerate Diversification: Adding new, unrelated products or
services
 Joint Venture: Two or more sponsoring firms forming a separate
organization for cooperative purposes
 Grand Strategies – Defensive Strategies:
 Retrenchment: Regrouping through cost and asset reduction to reverse
declining sales and profit
 Divestiture: Selling a division or part of an organization
 Liquidation: Selling all of a company's assets, in parts, for their
tangible worth
 The Three Boxes Theory
 Box 1 – Manage the present
 Box 2 – Selectively abandon the past
 Box 3 – Create the future

 Box 1 is about improving current businesses.

 Boxes 2 and 3 are about breakout performance
and growth