1. STRATEGIC MANAGEMENT
Strategic Management: Strategy comes from a Greek word “STRATEGOS” which means
generalship i.e art of general. The decisions and actions that determine the long run
performance of an organization is called strategies.
According to Fred R.David, “Strategic management is an art & science of formulating,
implementing, and evaluating, cross-functional decisions that enable an organization to
achieve its objectives”
The study of strategic management emphasizes the monitoring and evaluating the external
opportunities and threats, in light of corporation’s strengths and weaknesses. In essence, the
strategic plan is a company’s game plan.
Strategic management provides overall direction to the enterprise and involves specifying
the organization's objectives, developing policies and plans designed to achieve these
objectives, and then allocating resources to implement the plans. The purpose of strategic
management is to exploit and create a new and different opportunities for tomorrow.
3 Stages of the Strategic Management Process:
1. Strategy Formulation
2. Strategy Implementation
3. Strategy Evaluation
2. Strategy formulation is the process of establishing the organization’s mission, objectives and
choosing among alternative strategies. Sometimes strategy formulation is called strategy
Develop and evaluate strategic alternatives.
Select appropriate strategies for all level in the organization that provide relative
advantage over competitors.
Match organizational strengths to environmental opportunities.
Correct weaknesses and guard against threats.
Issues in strategic formulation are:
New business opportunities
Businesses to abandon
Allocation of resources
Expansion or diversification
Mergers or joint ventures
Avoidance of hostile takeover
Implementation is the process that
turns strategies and plans into actions in order to accomplish strategic objectives and goals.
Implementing your strategic plan is as important, or even more important, than your strategy.
Strategy implementation is also defined as the manner in which an organization should
develop, utilize, and amalgamate organizational structure, control systems, and culture to
follow strategies that lead to competitive advantage and a better performance.
Developing an organization having potential of carrying out strategy successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Making use of strategic leadership.
Action Stage of Strategic Management –
Most difficult stage
3. Mobilization of employees & managers
Interpersonal skills critical
Consensus on goal pursuit
strategy evaluation is the final
stage in strategic management. Managers desperately need to know when particular
strategies are not working well; strategy evaluation is the primary means for obtaining this
information. The significance of strategy evaluation lies in its capacity to co-ordinate the task
performed by managers, groups, departments etc, through control of performance. Strategic
Evaluation is significant because of various factors such as - developing inputs for new
strategic planning, the urge for feedback, appraisal and reward, development of the strategic
management process, judging the validity of strategic choice etc.
Final Stage of Strategic Management
Subject to future modification
Today’s success no guarantee of future success
New & different problems
Complacency leads to demise
A strategy focus on how an organization will compete in each of its SBUs (strategic business
The role of competitive advantage:
An organization’s distinctive competitive edge.
Quality as a Competitive Advantage
Differentiates the firm from its competitors.
Can create a sustainable competitive advantage.
Represents the company’s focus on quality management to achieve continuous
improvement and meet customers’ demand for quality.
Five Competitive Forces:
1. Threat of New Entrants The ease or difficulty with which new competitors can
enter an industry.
4. 2. Threat of Substitutes The extent to which switching costs and brand loyalty affect
the likelihood of customers adopting substitutes products and services.
3. Bargaining Power of Buyers The degree to which buyers have the market strength
to hold sway over and influence competitors in an industry.
4. Bargaining Power of Suppliers The relative number of buyers to suppliers and
threats from substitutes and new entrants affect the buyer-supplier relationship.
5. Current Rivalry Intensity among rivals increases when industry growth rates slow,
demand falls, and product prices descend.
External Opportunities and Threats:
External opportunities and threats are political, legal, economical, social, environmental,
technological, cultural and competitive trends, events and factors that may benefit or harm
an organization in future. In contrast to strengths and weaknesses of an organization which
are internal thus controllable factors, external opportunities and threats are beyond the
control of a single organization therefore, categorize as external rather than internal.
1. Contribute to corporate social responsibility.
2. Improve perception of people via different programs.
3. Partnership or acquisition of supplier(s) would further reduce the cost of the products.
1. Economic slow down in USA reduces Wal-Mart revenues.
2. Government regulation in different countries.
The process of identifying, monitoring and evaluating of external opportunities and threats
for an organization is important to formulate strategies to utilize the available external
opportunities and defend the external threats.
Internal Strengths and Weaknesses:
Strengths and weaknesses are internal therefore, categorize as controllable factors that are
performed well or poorly. These factors take birth in management, marketing, finance,
5. human resource, research & development, information technology and manufacturing
functional areas of business.
Strengths and weaknesses are determined by:
1. Elements such as natural resources and reputation in industry.
2. Comparative analysis with competitors.
3. An organization objectives
4. Comparing to past records of company. For examples, Assets increased by 10%,
revenues and profits increase by 20%.
5. Ratio analysis
6. Benchmarking with industy.
6. Vision: “What do we want to become?”
Vision Statement Examples: General Motors’ vision is to be the world leader in
transportation products and related services.
Mission Statement: Answers the question:
“What is our business?”
An enduring statement of purpose that distinguishes one organization from other
A declaration of an organization’s “reason for being”
Mission Statements are also called:
Statement of purpose
Statement of philosophy
Statement of beliefs
Statement of business principles
A statement “defining our business”
Mission Statement Examples:
Proctor & Gamble provides branded products and services of superior quality and value that
improve the lives of the world’s consumers. As a result, consumers reward us with industry
leadership in sales, profit, and value creation, allowing our people, our shareholders, and the
communities in which we live and work to prosper.