Module 1

PREPARED BY LAKSHMI.H
 NATURE

•Strategic management is defined as the set of decisions &

actions that result in formulation & Implementation of plans
designed to achieve a company’s objective
•Comprises of 9 critical tasks:
1.Formulate company’s mission- broad statements about
purpose, philosophy & goals
2.Conduct an analysis- reflects company’s internal conditions &
capabilities
3.Assess company’s external environment
4.Analyse company’s options- resources- external environment
5.Identifying options- in light with company’s mission
6.Select long term objectives & grand strategies- achieve
desirable options
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7. Develop annual objectives & short term strategies-
compatible with long term objectives & grand strategies
8. Allocate budget for tasks, people, technology, structure &
reward system
9. Evaluate success for strategic process & input for future
decision making

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 CHARACTERISTICS OF SM

1. Performance oriented
2. Ongoing nature
3. Dynamic than static
4. Oriented to present & future
5. Concerned with external & internal factors
6. Concerned with performing well and satisfying the
shareholders
7. Developed by top mgmt.
8. Involved allocation of large resources
9. Impact long term prosperity of the firm

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STRATEGIC MANAGEMENT PROCESS

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 STRATEGIC MANAGEMENT
PROCESS
•Major functions: Depicts sequence in the relation of major
components in Strategic Management as a process
•Components of SM Model:
1.Company’s mission: unique purpose- sets apart from the
other companies
2.Internal analysis: Strength & weakness- quality & quantity of
Human, finance & structure- helps in analysis of company’s
past success & future opportunities
3.External environment: 3 interactive segments: remote (PEST
factors), industrial (similar firms, competition); operating(mkt
share, location, raw mtrls)
4.Strategic analysis & choice: analysis of external envt-
possible avenues for investment- screened for company’s
mission & generate desired opportunities- choice is made
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5. Long term objectives: results that company seek in
multiyear- profitability, ROI, competitive position,
technological leadership, employee relation etc
6. Generic & Grand strategies: low cost differentiation,
differentiation, focus strategies- generic strategies; market
development, pdt development, innovation, horizontal
integration, vertical integration, JV, mergers, concentric
diversification, conglomerate diversification etc- Grand
strategies
7. Short term objectives: guidance- achieve desired results- @
end of one year

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• Action plans translate generic & grand strategies into action by
incorporating 4 elements:
• Identify specific actions to be undertaken in next year or less
than a year
• Clear time frame for completion of action
• Create accountability for completion of tasks
• Immediate objectives to be achieved

8. Functional Tactics: short term limited scope plans are called

“Tactics”. Functional Tactics- means or activities used to
achieve short term objectives
9. Policies that empowers action: guidelines for decision making
10. Restructuring, Reengineering & refocusing the organization:
downsizing, restructuring & reengineering- company’s structure,
leadership & culture
11. Strategic control & continuous improvement: tracking strategy-
being implemented, detecting problems or changes. Continuous
improvement: provides managers to be proactive & respond on
timely basis 8
• Strategic Management as a process:
• Four implications:
• 1st implication: inter related- one component- affects-
another- 2 way arrows- reciprocal. Eg: Archies
• 2nd implication: strategy formulation & implementation are
sequential- company’s mission- analysis- review,
evaluation
• 3rd implication: feedback: analysis of post implementation-
enhance future decision making
• 4th implication: SM is a dynamic system- constantly
changes- affecting inter-related & interdependent activities

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 WHAT IS A BUSINESS
MODEL?

• A business model of a company answers to the following:

1. What value it creates
2. Who it serves
3. What sets it apart from its competitors
4. What resources it depends upon
5. The relationship with other partners/ companies
6. Channel through which the value is delivered
7. How it generates money
8. Companys’ cost structure
9. Sustainability of the companys’ business
• Business model is about continuous re-evaluation

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 RELATIONSHIP BETWEEN A COMPANY’S STRATEGY & ITS
BIZ MODEL

•A company’s biz model explains the rationale for why its biz
approaches & strategy will be money maker
•Absence in delivery of profitability & survival of the business
in doubt
•Company’s strategy- relates to its competitive initiatives &
action planning for running a biz
•Company’s model- why & how the biz- generate revenues to
cover costs & produce attractive ROI & profits
•Companies in biz-making reasonable biz profits- acceptable
biz model.
•Eg: AMUL, McD (fast food chains), subscription based biz
model for newspapers, cable network

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 VTU QUESTIONS
• Strategic management is an art
or science?
• Strategic mgmt is an art coz past of
experience, feelings, judgment useful in
decision making in situation of uncertainty
• Strategic mgmt is science coz it’s a
logical, systematic approach, organization
uses quantified information and data for
decision making

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 Strategy Tactics
• Long term • Short term
• Corporate point of • Functional point of
view view
• High uncertainty • Uncertainty is low
• Developed by top • Low level
management. management
• Affects entire • Affects specific parts
organization of organization
• Few details involved • More details involved
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