Chapter One

Strategy
• Strategy is a high-level 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 achievement of a
goal or solution to a problem.
• A strategy is a long term, future oriented, competitive, comprehensive, unified and
integrated plan that relates the internal advantages or disadvantages to external
challenges (opportunities and threats) for the achievement of organizational goals.
Strategy at Different Levels of a Business
1. Corporate level Strategy
Corporate level Strategy is concerned with the overall purpose and scope of the business
to meet stakeholder expectations.
Corporate Strategy level is
stated in the mission
statement, which explains
the business type and
ultimate goal of the firm
• Created by: Top
level management
• Relates to: Business selection in which the company should compete.
• Deals with: Entire business organization
• Term: Long term strategy
• Focus: Maximizing profitability and business growth.
• Major strategies: Expansion, Stability and Retrenchment.
Corporate level Strategy is heavily influenced by investors in the business and acts to
guide strategic decision-making throughout the business.
2. Business Unit Strategy
Business-level strategy is
concerned with a firm's position in
an industry . It concerns strategic
decisions about choice of
products, meeting needs of
customers, gaining advantage over
competitors, exploiting or creating
new opportunities etc.
• Created by: Middle level management
• Relates to: Selection of plan to fulfill the objectives of organization.
• Deals with: Particular business unit or division
• Term: Short term strategy
• Focus: Competing successfully in the marketplace.
• Major strategies: Cost Leadership, Focus and Differentiation
3. Functional level Strategy
Functional level Strategy is concerned with how each part of the business is organized to
deliver the corporate and business-unit level strategic direction. Functional strategy therefore
focuses on issues of resources, processes, people etc.
 This is the day-to-day strategy that is going to keep organization moving in the right
direction.

Strategy vs. Tactic

Strategy: A plan of action designed to achieve a long term goal
- Example: “Build the company’s brand”
Tactic: An action taken to execute the strategy. Example: “Hire a celebrity to endorse our
product”
Strategy POD Tactics
future Focus on Immediate needs
vision Oriented toward Goal and
objectives
change Prefers change or stability
stability?
environment Emphasize the organization
externally Looks internally
Innovation and reliability Prefers Reliable
techniques
Consider what can be Wants to Improve what is

Strategic Management
• Strategic management is the process in which an organization develops and implements
the strategies that managers can carry so as to achieve better performance and a
competitive advantage for their organization.
• Strategic management is the study of
- Why some firms outperform others.
- How to create a competitive advantage in the market place that is unique,
valuable, and difficult to copy
Definition of Strategic Management by Dess, Lumpkin & Eisner
Strategic management consists of the analysis, decisions, and actions an organization
undertakes in order to create and sustain competitive advantages.
That is, the strategic management of an organization entails three ongoing process:
Analysis: Strategic management is concerned with the analysis of the
I. Strategic goals (vision, mission, strategic objectives)along with
II. Internal and external environment of the organization.
Decisions: Leader must make strategic decisions, address two basic questions:
I. What industries should we compete in?
 II. How should we compete in those industries?
These questions often involve an organization’s domestic and international operations.
Actions:
I. Allocate necessary resources
II. Design the organization to bring intended strategies to reality

What are the 4 key Attributes of strategic management?

1. Strategic Management is directed toward overall organizational goals & objectives
• Effort must be directed at what is best for the total organization, not just a single
functional area.
• This perspective can be referred as “organizational versus individual rationality.”
• What might look “rational” or most appropriate for one functional area may not be in
the best interest of the overall firm
• For example, Research and development may “over engineer” the product in order to
develop a far superior offering, but the design may make the product so expensive
that market demand is minimal.
• Therefore, managers should look strategic issues from the perspective of the
organization rather than that of the functional area(s) in which they have the most
training and experience.

2. Strategic management includes multiple stakeholders in decision making

• Managers must incorporate the demands of many stakeholders when making decision.
• Stakeholders are those individuals, groups, and organizations who have a “stake” in
the success of the organization, including owners (shareholders in a publicly held
corporation), employees, customers, suppliers, the community at large, and so on.
• Managers will not be successful if they continually focus on a single stakeholder.
For example, if the greater emphasis is on generating profits for the owners, employees
may become alienated, customer service may suffer, and the suppliers may become
irritated due to continual demands for pricing concessions.

3. Strategic management requires incorporating both short-term & long-term perspectives

Managers must maintain both a vision for the future of the organization as well as a
focus on its present operating needs.
This perspective can be referred as a “creative tension.”

4. Strategic Management involves the recognition of trade-offs between effectiveness and

efficiency
The difference between effectiveness and efficiency is “doing the right thing”
(effectiveness) and “doing things right” (efficiency).
While managers must allocate and use resources wisely, they must still direct their efforts
toward the attainment of overall organizational objectives.
Managers who only focus on meeting short-term budgets and targets may fail to attain the
broader goals of the organization.
Forms of Strategy
Formal versus informal
Formality refers to the degree to which participants, responsibilities, authority, and discretion
in decision making are specified in strategic management.
In particular formality is associated with the size of the firm and with its stage of
development.
- In smaller firms, strategic evaluation is informal, intuitive and limited.
- Very large firms make strategic evaluation part of a formal planning system.
Intended versus realized
Intended strategy
An intended strategy is the strategy in which organizational decisions are determined only
by analysis that an organization hopes to execute. Intended strategies are usually described
in detail within an organization’s strategic plan.
Realized Strategy
A realized strategy is a real and practical strategy. It is the strategy that a firm actually
follows. Realized strategies are often a by-product of an organization’s intended strategy
(i.e., the firm’s plans), the firm’s
deliberate strategy (i.e., the portions of the
intended strategy that an organization
continues to pursue over time), and its
emergent strategy (i.e., what the firm does
in response to unexpected opportunities and challenges).
In most other cases, however, firms’ original intended strategies are lost during its journey.
The abandoned sections of the original and intended strategy are known as unrealized
strategy.
Strategic Management Process:
The most common and used frameworks of strategic management include three steps:
Analysis: Refers to managers' development of an understanding about the organization's
overarching goals, internal and external environment and organization’s intellectual assets.
Analysis involves-
 Performing a situation analysis (analysis of the internal environment of the
organization), including identification and evaluation of
 Current mission, vision, strategic objectives, strategies
 Major strengths and weaknesses
 Analyzing the organization's external and competitive environment, including major
opportunities and threats.
 Assessing firm’s intellectual assets.
• The process includes conducting Porter's Five Forces, SWOT, PESTEL, and value
chain management analyses and combining expertise in each industry.
• Identifying and discussing the major critical issues that require particularly high priority
attention by management.
• Management should deal with causal problems rather than their results and symptoms.
• Both immediate and long-range problems should receive attention.
 Formulation: refer to the overall plans that firms develop to compete and outperform
their rivals. Once the analysis is done, the organization moves to the strategy formulation
stage where
• The mission and objectives of the organization is revised as necessary,
• The plan to acquire the required resources is designed,
• Prioritization of the issues facing the business is done and finally
• The strategy is formulated accordingly.
• It is done for maximizing core competence and competitive advantages that use their
strengths, limit weaknesses, exploit opportunities, and defend against threats
simultaneously
• Managers formulate:
 Corporate level Strategy: Answers the foundational question of what organization
want to achieve? Is it growth, stability, or retrenchment?
 Business level Strategy: Focuses on how organization going to compete
 Functional level Strategy: Aimed at improving the effectiveness of company’s
operation.
 International strategy: Focus on attaining competitive advantage in international
market.
 Entrepreneurial strategy and competitive dynamic: Aimed at new value creation for
economic growth,
Implementation:
• Refer to action made by firms that carry out the formulated goals including proper strategic
controls, organizational designs and leadership.
• After formulation of the strategy, an implementation plan is set, which addressing
- What has to be done,
- How will it get done,
- Who will do it,
- When will it be done,
- Where will it be done, and
- Why are we doing it this way
• The employees of the organization are clearly made aware of their roles and
responsibilities.
• Designing implementation plan include
 Resources (financial, human, physical, technological)
 Obtaining & maintaining support for changes
 Reward systems
Timing (especially sequencing & constraints)
 Culture and Organization structure
 Monitoring & control systems
 Leadership, managing change
• Then the implementation begins.
Those who implement & are affected by strategy changes are often different from those
who formulate the changes.
Why is it important for managers to recognize the interdependent nature of these activities
in strategic management process?
 The interdependent nature of these activities stems from various feedback mechanisms
that occur as managers implement their firms' strategies.
 It important for managers to recognize the interdependent nature of these activities
because
- Unforeseen environmental developments, unanticipated resource constraints, and/or
changes in managerial preferences will force firms to modify their intended strategy,
combining it with an emergent strategy, and resulting in a realized strategy.
- The realized strategy will in turn be modified by further unforeseen events.
- The continually modified realized strategy will consist of refined analyses,
decision/formulation, and implementation/actions that are constantly being updated.

Mintzberg's 5 Ps of Strategy
Management expert, Henry Mintzberg, argued that it's really hard to get strategy right. He
developed his 5 Ps of Strategy – Five different definitions of (or approaches to)
developing strategy.
They are: Plan, Ploy, Pattern, Position, and Perspective.
1. Strategy as a Plan
Strategy is a plan - a guideline (or set of guidelines) to deal with a situation.
The strategy is made in advance of its implementation and is followed up by actual
implementation and development.
They are developed consciously and purposefully
2. Strategy as Ploy
A ‘ploy’ is usually a move in a competition or a game that is taken to beat the
competitor and turn the situation to one’s own advantage.
Mintzberg says that getting the better of competitors, by plotting to disrupt, dissuade,
discourage, or otherwise influence them, can be part of a strategy.
This is where strategy can be a ploy, as well as a plan.
For example, Patanjali has grown into a big corporation in India; it now competes with
HUL, P&G, Emami Ltd., Marico Industries Ltd., Pepsi Co. and other such global Fast-
moving consumer goods (FMCG) giants. The most important factor for the high profits is
minimum marketing expenses. This organization has a strong brand ambassador in Baba
Ramdev. The brand is entirely pushed into market by baba’s popularity.

3. Strategy as Pattern: Organizations cannot always be accurate in their plans because the
business atmosphere is full of complexities. In some cases it may be possible to look
back at what has happened, and describe a company’s strategy in terms of a pattern that
emerged.
4. Strategy as Position: "Position" is another way to define strategy – that is, how a
company decide to position itself in the marketplace. Strategies are planned for locating or
fit a business within its environment, and deciding on what position to adopt; e.g. market
position, brand position, product portfolio etc.
5. Strategy as Perspective
Perspective looks inward into the firm. Strategy is a perspective shared by members of an
organization, through their intentions and by their actions.
The choices an organization makes about its strategy rely heavily on its culture – just as
patterns of behavior can emerge as strategy, patterns of thinking will shape an
organization's perspective.
Real life business Example
Honda Company
Honda is now the leading manufacturers of motorbikes.
The company identified and targeted an untapped market for small 50cc bikes in the US.
(PLAN)
These bikes had a defined market, and sold through dedicated motorbike dealerships and
compete with the larger European and US bikes of 250ccs and over. (PLOY)
They proved very popular with people who would never have bought motorbikes before
(PATTERN)
Company adopted a new slogan to present itself to the customers: ‘You meet the nicest
people on a Honda.’ (POSITION)
The strategy had emerged, through agents, managers, conscious intentions, but they
eventually responded to the new situation. (PERSPECTIVE)

Strategic Direction
Organizations express priorities best through stated goals and objectives that form
hierarchy of goals, which includes its vision, mission and strategic objectives.
Company vision: The vision statement describes the desired future position of the
company.
- Dream or a picture to be achieved ultimately
 It is a goal that is massively inspiring, overreaching and long term.
 It is at the top in the hierarchy of strategic goal.
 Describes something possible, not necessarily predictable.
 While a vision statement doesn’t tell how organization going to get there, it does set
the direction for strategic and operational planning.
 It reminds what organization are trying to build and pulls people, who hold it, towards
it.
 When writing a vision statement, organization must ensure that it doesn’t fall into the
trap of only thinking ahead a year or two. Once has its vision statement, it will have
a huge influence on decision making and the way organization allocate resources.
 Vision statements fail for many reasons-including
- The walk doesn’t match the talk
- Irrelevance
- Too much focus leads to missed opportunities.
Mission statement
 A company’s mission statement encompasses both the purpose of the company as well
as the basis of competition and competitive advantages.
 Mission defines why the organization exists and focuses on the means by which the
firm will compete. It does not state an outcome.
 A mission statement is not required to be inspirational; instead, it provides a clear
focus about what an organization does and what it doesn’t.
  A firm’s mission statement can and should change when competitive conditions
dramatically change or the firm is faced new threats or opportunities. But it should still
tie back to organization’s core values, customer needs and vision.
 Effective mission statements
- Incorporate the concept of the stakeholder management, suggesting that
organizations must response to multiple constituencies.
- Define current and future business in terms of product, score, customer, and
market price.
Company: Amazon
Mission: We strive to offer our customers the lowest possible prices, the best available
selection, and the utmost convenience.
Vision: To be Earth’s most customer-centric company, where customers can find and
discover anything they might want to buy online.
Strategic Objective
• A set of organizational goals that are used to operationalize the mission statement.
That is they help to provide guidance on how the organization can fulfill or move
toward the ‘higher goals’ in the goal hierarchy- the mission and vision.
• They are specific (tells what needs to be accomplished) and cover a well-defined
time frame.
• Strategic objectives can be defined in quantifiable and measurable in terms of whether
or not they are achieved.
• Must be consistent with the organization’s vision and mission, and achievable with the
organization’s capabilities and opportunities in environment.
• Help to channel all employees’ efforts toward common goals
• Example: Decrease the cost of producing a product or service, or increase the
revenue generated by delivering a product or service.
Relationship between Company’s Vision, Mission and Strategic Objective:
Without mission and vision, the strategic objectives exist in a vacuum, as the
mission is the starting point for planning, the vision is the destination, and the
strategic objective is the roadmap that helps organization to navigate from one to
the other.
Strategic Vison vs Mission Statement
Strategic Vison POD Mission Statement
The vision statement describes the desired Definition A mission statement is a concise explanation of
future position of the company. the organization's reason for existence. It
describes the organization's purpose and its
overall intention.
It answers the question, Answer It answers the question,
“Where do we aim to be?” “Why do we exist?”
“What do we do?
“What makes us different?”
A vision statement talks about firm’s very Time A mission statement talks about the firm’s
long term future. present leading to its future.
It lists the purpose and primary objectives for Function It lists where organization see itself some years
which the organization is formed. from now and communicates both the purpose
and values of organization’s business.
A vision statement is broad based Scope Mission statement is more specific, focused on
the means by which the firm will compete.
A vision statement inspires organization to Inspiratio A mission statement is not required to be
give its best, reminds what organization are n inspirational; instead, it provides a clear focus
trying to build and pulls people, who hold it, about what an organization does and what it
towards it. doesn’t.
Vison should remain intact, even if the Change A firm’s mission statement can and should
market changes dramatically, because it change when competitive conditions dramatically
speaks to what company represents, not just change or the firm is faced new threats or
what it does opportunities. But it should still tie back to
organization’s core values, customer needs and
vision.
Clarity and lack of ambiguity: Features Purpose and values of the organization:
 Describing a bright future of an  Who are the organization's primary
 Memorable and engaging expression effective stakeholders?
statemen
 Realistic aspirations,  What are the responsibilities of the
t
 Achievable organization towards the stakeholders?
 Alignment with organizational values
and culture.
Identifies why employees need/want to work Employee Helps employees to act and guides them in
with the organization and gives direction s what they should do
about how they are expected to behave and
inspires them to give their best.
Company: Amazon Example Company: Amazon
Vision: To be Earth’s most customer-centric Mission: We strive to offer our customers the
company, where customers can find and lowest possible prices, the best available
discover anything they might want to buy selection, and the utmost convenience.
online.

Stakeholders and Corporate mission

The corporate mission statement is a key indicator of how a company views the claims of
its stakeholders.
Stakeholders
Individuals or groups that have an interest,
claim or stake in an organization as a result
of their ability to affect or their potential to
be affected by the organization.
There are internal and external stakeholders
• Internal Stakeholders
Internal stakeholders are shareholders and
employees, including senior management and
board members.
 • External Stakeholders
All individuals and groups that have some claim on the company.
This group typically comprises customers, suppliers, governments, unions, local communities
and the general public.

 Corporate Mission Statements incorporate stakeholder claims into its strategic decision
making and by doing so reduce the risk of losing stakeholder support.
 In a mission statement a company makes a formal commitment to its stakeholders,
sending out the message that its strategies will be formulated with the claims of
stakeholder in mind.
 Top managers will be interested in satisfying the needs of shareholders and other
stakeholders such as customers, suppliers, employees, creditors, government, and the
community.
 Managers who are interested solely in stockholder management are likely to make
decisions that satisfy short-term profit objectives.
 These decisions might include downsizing, neglect of asset maintenance, or put
pressure on suppliers to lower prices. However, these decisions are likely to adversely
affect long-term performance.
 Top managers who pay attention to all stakeholders are less likely to make decisions
counter to the firm's objective of long-term profit maximization.
Stakeholder’s Impact Analysis