Question: What is Strategic Management? What are the characteristics of Strategic Management?

What
are the dimensions of Strategic Decisions?

What is strategy?
"Strategy is the direction and scope of an organization over the long-term:

Strategy, a word of military origin, refers to a plan of action designed to achieve a

particular goal. In military usage strategy is distinct from tactics, which are concerned
with the conduct of an engagement, while strategy is concerned with how different
engagements are linked.

Following are some of the definitions with which we will be able to understand
the meaning of strategy.

Definitions:-
“Strategy is the determination of the basic long term goals and objectives of an
enterprise and the adoption of the course of action and the allocation of resources
necessary for carrying out these goals.”

Alfrred D. Chandler.

“A strategy is a unified, comprehensive, and integrated plan that relates the

strategic advantages of the firm to the challenges of the environment. It is designed to
ensure that the basic objectives of the enterprise are achieved through proper
execution by the organization.”
Lawrence R. Jauch & William F. Glueck.

How Strategy is Managed - Strategic Management

In its broadest sense, strategic management is about taking "strategic decisions" -
decisions that answer the question above.

In practice, a thorough strategic management process has three main components,

shown in the figure below:

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 1. Strategic Analysis

This is all about the analysing the strength of businesses' position and understanding
the important external factors that may influence that position. The process of
Strategic Analysis can be assisted by a number of tools, including:

PEST Analysis - a technique for understanding the "environment" in which a business operates

Market Segmentation - a technique which seeks to identify similarities and

differences between groups of customers or users
Competitor Analysis - a wide range of techniques and analysis that seeks to summarise a
businesses' overall competitive position

Critical Success Factor Analysis - a technique to identify those areas in which a

business must do better than the competition in order to succeed

SWOT Analysis -

2. Strategic Choice/ Formulation

This process involves understanding the nature of stakeholder expectations (the

"ground rules"), identifying strategic options, and then evaluating and selecting
strategic options.

3. Strategy Implementation

Often the hardest part. When a strategy has been analysed and selected, the
task is then to translate it into organisational action.

Definition of Strategic Management

Some of the important definitions are:

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1. “Strategic management is concerned with the determination of the basic
long-term goals and the objectives of an enterprise, and the adoption of courses of action and allocation of
resources necessary for carrying out these goals”.
– Alfred Chandler, 1962
2. “Strategic management is a stream of decisions and actions which lead
to the development of an effective strategy or strategies to help achieve corporate objectives”.
– Glueck and Jauch, 1984
3. “Strategic management is a process of formulating, implementing and
evaluating cross-functional decisions that enable an organisation to achieve its objective”.
– Fed R David, 1997
4. “Strategic management is the set of decisions and actions resulting in
the formulation and implementation of plans designed to achieve a company’s objectives.”
– Pearce and Robinson, 1988
5. “Strategic management includes understanding the strategic position of
an organisation, making strategic choices for the future and turning strategy into action.”
– Johnson and Sholes, 2002
6. “Strategic management consists of the analysis, decisions, and actions an
organisation undertakes in order to create and sustain competitive advantages.”
– Dess, Lumpkin & Taylor, 2005

Following are the features/ characteristics of strategic management:

1. Objective.
2. Future oriented.
3. Availability and allocation of resources.
4. Influences of Environment.
5. Universal applicability.
6. Levels of strategy.
7. Review.

1. Objective Oriented:
The business strategies are objectives oriented and are directed towards
organizational goal. To formulate strategies the business should know the objectives
that are to be pursued. For example if any business want to achieve growth then it
has to set following objectives.
a) To increase market share.
b) To increase customers satisfaction.
c) To enhance the goodwill of the firm.

2. Future Oriented:
Strategy is future oriented plan and formulated to attain future position of the
organization. Therefore strategy enables management to study the present position of

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organization and decides to attain the future position of the organization. This is
possible because strategy answer question relating to the following aspects.
a) Prosperity of the business in future.
b) The profitability of the business in future.
c) The scope to develop and grow in future in different business.

3. Availability and Allocation of Resources:

To implement strategy properly there is need of adequate resources and
proper allocation of resources. If it is done then business can attain its objectives.
There are three types of resources required by business namely physical resources, i.e
plant and machinery, financial resources i.e capital, and human resources i.e
manpower. If these resources are properly audited/evaluated and find out its strength
and weaknesses and co- ordinate well then management can do better strategy
implementation.

4. Influence of Environment:
The environmental factors affect the formulation and implementation of
strategy. The business unit by analyzing internal and external environment can find
out its strength and weaknesses as well as opportunities and threats and can
formulate its strategy properly.

5. Universally Applicable:
Strategies are universally applicable and accepted irrespective of business
nature and size. Every business unit designs strategy for its survival and growth. The
presence of strategy keeps business moving in right direction.

6. Levels of strategy:
There are companies that are working in different business lines with regards
to products /services, markets or technologies and are managed by same top
management. In this case such companies need to frame different strategies. The
strategies are executed at three different levels such as –
a) Corporate level
b) Business level
c) Functional/operational level

Corporate level strategies are comprehensive plan of action covering the

various functions that are performed by different SBUs(strategic business unit, which
involved in a signal line of business) the plan deals with the objectives of the company,
allocation of resource and co-ordination of SBUs for best performance.

Business level strategy is comprehensive plan directed to attain SBUs

objectives, allocation of resources among functional areas and coordination between
them for giving good contribution for achieving corporate level objectives.

Functional level strategy is restricted to a specific function. It deals with

allocation of resources among different operations within that functional area and
coordinating them for better contribution to SBU and corporate level achievement.

7. Revision of strategy:

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 Strategies are to be reviewed periodically as in the process of its implementation
certain changes are going to take place. For example while implementing growth
strategy there could be shortage of resources because of limited sources or recession
during the period so retrenchment strategy should be considered.

8. Classification of strategy:
Strategies are classified into four major categories known
as –
a) Stable growth strategy: Stability strategy is a strategy in which the organization retains its present strategy at the
corporate level and continues focusing on its present products and markets.
b) Growth strategy: Firms choose expansion strategy when their perceptions of resource availability and past financial
performance are both high.
c) Retrenchment strategy: Many firms experience deteriorating financial performance resulting from market erosion and
wrong decisions by management
d) Combination strategy: the three generic strategies can be used in combination; they can be sequenced, for instance
growth followed by stability, or pursued simultaneously in different parts of the business unit. Combination Strategy is designed
to mix growth, retrenchment, and stability strategies and apply them across a corporation’s business units

Dimensions of Strategic Management

Strategic management process involves the entire range of decisions. Typically,

strategic issues have six identifiable dimensions:
1. Strategic issues require top-management decisions: Strategic management relates to
several areas of a firm’s operations. So, it requires top management’s involvement.
Generally, only the top management has the perspective needed to understand the broad
implications of its decisions and the power to authorize the necessary resource
allocations.
2. Strategic issues involve the allocation of large amounts of company resources:
Strategic management requires commitment of the firm to actions over an extended period
of time. So they require considerable resources, such as, physical assets, money,
manpower etc.
3. Strategic issues are likely to have significant impact on the long-term success of the
firm: Once a firm has committed itself to a particular strategy, its image and competitive
advantage are tied to that strategy; its prosperity is dependent upon such a strategy for a
long time.
4. Strategic issues are future oriented: Strategic management encompasses forecasts,
what is predictable by the managers. In such decisions, emphasis is placed on the
development of projections that will enable the firm to select the most promising
strategic options. In the unstable environment, a firm will succeed only if it takes a
proactive stance towards change.
5. Strategic issues usually have major multifunctional or multibusiness consequences:
Strategic management has complex implications for most areas of the firm. They impact various
strategic business units especially in areas relating to customer-mix, competitive focus,
organisational structure etc. All these areas will be affected by allocations or reallocations of
responsibilities and resources that result from these decisions.
6. Strategic issues require considering factors in the firm's external environment: Non-self-

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generative decisions: While strategic management may involve making decisions relatively
infrequently, the organisation must have the preparedness to make strategic decisions at any
point of time. That is why Ansoff calls them “non-self-generative decisions.”

Question: What is the Nature, benefits, Scope and Importance of Strategic Management?

Th e N a t u r e o f S t r a t e g i c M a n a g e m e n t :

Defined:Art&scienceofformulating,implementing,and
e v a l u a t i n g , c r o s s - f u n c t i o n a l d e c i s i o n s t h a t e n a b l e a n o r g a n i z a t io
n t o ach ie v e it s o b je ct iv e s.

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Strategic management is different in nature from other aspects of management. An individual
manager is most often required to deal with problems of operational nature. He generally focuses on
day-to-day problems such as the efficient production of goods, the management of a sales force, the
monitoring of financial performance or the design of some new system that will improve the level.
These are all very important tasks. But they are essentially concerned with effectively
managing resources already deployed, within the context of an existing strategy. In other
words, operational control is what managers are involved in most of their time. It is vital to the
effective implementation of strategy, but it is not the same as strategic management.

Strategic management involves elements geared toward a firm's long term survival and achievement
of management goals. The components of the content of a strategy making process include a desirable
future, resource allocation, management of the firm-environment and a competitive business ethics.
However, some conflicts may result in defining the content of strategy such as differences in
interaction patterns among associates, inadequacy of available resources and conflicts between the
firm's objectives and its environment.

BenefitsofStrategicManagement:

Financial Beneƒits:

• Improvement in sales
• Improvement in profitability
• Productivity improvement

Non-FinancialBenefits:

• Improved understanding of competitors strategies

• En h a n c e d a w a r e n e s s o f t h r e a t s
• Reduced resistance to change
• Enhanced problem-prevention capabilities

AdvantagesofInternational0perations:

➢ Ab so r b e xc e ss c a p ac i t y
➢ Reduce unit co st s
➢ Sp re ad ri sk over wide r mark et s
➢ Lo w-c os t p r oduc ti on ƒ aci li ti e s
Disadvantages oƒ International Operations

➢ Difficult communications
➢ Underestimate foreign competition
➢ Cultural barriers to effective management
➢ Complications arising from currency differences

Scope of strategic management:

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j. Constable has defined the area addressed by strategic management as "the
management processes and decisions which determine the long-term structure
and activities of the organization".
This definition incorporates five key themes:
* Management process. Management process as relate to how strategies are
created and changed.
* Management decisions. The decisions must relate clearly to a solution of
perceived problems (how to avoid a threat; how to capitalize on an opportunity).
* Time scales. The strategic time horizon is long. However, it for company in real
trouble can be very short.
* Structure of the organization. An organization is managed by people within a
structure. The decisions which result from the way that managers work together
within the structure can result in strategic change.
* Activities of the organization. This is a potentially limitless area of study and
we normally shall centre upon all activities which affect the organization.

Importance of strategic management:

Strategic management used to play a different role in more predictable times after
the Second Word War. Strategic plans of the past usually range 3 to 5 years. Some
companies could even have plans for 10 good years. That's not possible today
given rapid evolution of our society.

What still matters in strategic management lies in the value of planning ahead.
There's an old saying that if you fail to plan, you are planning to fail. By acting on this,
strategic management actually gives the organization direction, a sense of identity
and unity towards what the business goal. Therein lays the continued importance of
strategic management towards business success.

Every business has a vision and a mission. Strategic management takes into
consideration both of these. Strategic management helps in achieving the
organizational goals in an effective and efficient manner.

Improved strategic management processes may also facilitate the development of

the more complex management structural that are needed as firms grow. It also
helps firms to articulate, communicate and monitor the implementation of strategy
using a system interlinked with the long-term vision of the corporations.

Why Strategic Management is so important?

Today management is needed in all types of organizations regardless of their
size, at all organizations levels and in all work areas. Because management is
universally needed, improving the way an organization is managed is one of
the keys to success, and the importance of strategic management to achieve
this goal is recognised around the world.
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 O Gives everyone a role
O Makes a difference in performance levels
O Provides systematic approach to uncertainties
O Coordinates and focuses employees

Importance:
Like mentioned before, strategic management can and will influence the
organization’s performance. That’s why you can have organizations that face the same
environmental conditions, but with different performance levels – and considering
recent studies, there is a wide belief that organization’s that use strategic planning
usually have better performance that the ones that don’t.

Another reason that supports the importance of strategic management has to do with
the continually changing situation that organizations face these days, because it helps
managers to examine relevant factors before deciding their course of action, thus
helping them to better cope with uncertain environments.

Finally, strategic management is important most organizations are composed by diverse

divisions and departments that need to be coordinated, else there would be no focus on
achieving the organization's goals.

Question: What is Strategic Management Process? Discuss in detail.

Strategic Management Process

Strategic Management Process

Developing an organisational strategy involves four main elements –

strategic analysis, strategic choice, strategy implementation and
strategy evaluation and control. Each of these contains further steps,
corresponding to a series of decisions and actions, that form the basis

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of strategic management process.

Strategic management is a dynamic process .it is continual, evolving, interactive

process. it means that it cannot be a rigid, step- wise collection of few activities
arranged in a sequential order rather it is a continually evolving mixture of relevant
activities. Managers perform these activities in any order contingent upon the
situation they face at a particular time. And this is to be done again & again over the
time as the situation demands. There are four major phases of strategic management
process which are as under.
A) Establishment of strategic intent.
B) Formulation of strategies.
C) Implementation of strategies.
D) Strategic evaluation and control.

A. Establishment of strategic intent:

It is a first step in strategic management Process. It involves the hierarchy of

objectives that an organization set for itself. Generally it includes vision, mission,
business definition and objectives establishing the hierarchy of strategic intent which
includes -

1. Creating and communicating a vision.

2. Designing the mission statement.
3. Defining the business.
4. Adopting the business model.
5. Setting objectives.

The hierarchy of strategic intent lays the foundation for strategic management
of any organization. The strategic intent makes clear what organization stand for. In
the hierarchy, the vision intent serves the purpose of stating what the organization
wishes to achieve in the long run. The mission relates the organization to the society.
The business definition explains the businesses of the organization in terms of
customer needs, customer groups and alternative technologies. The business model
clarifies how the organization creates revenue. And the objectives of the organizations
state what is to be achieved in a given period of time.

B. Formulation of strategy:

Formulation of strategy is relates to strategic planning. It is done at different

levels i.e. corporate, business, and operational level. The strategic formulation consists
of the following steps.

1. Framing of mission statement :

Here the mission states the philosophy and purpose of the organization. And all
most all business frames the mission statement to keep its activities in the right
direction.

2. Analysis of internal & external environment:

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 The management must conduct an analysis of internal and external
environment. Internal environment consists of manpower, machines, and other
sources which resides within the organization and easily alterable and adjustable.
These sources reveal the strength and weakness of the organization. External
environmental factor includes government, competitions, consumers, and
technological developments. These are not adjustable and controllable and relates to
organizations opportunities and threats.

3. Setting of objectives:
After SWOT analysis, the management is able to set objectives in key result
areas such as marketing, finance, production, and human resources etc. While setting
objectivities in these areas the objectives must be realistic, specific, time bound,
measurable, and easy attainable.

4. Performance comparison :
By undertaking gap analysis management must compare and analyze its
present performance level with the desired future performance. This enables the
management to find out exact gap between present and future performance of the
organization. If there is adequate gap then, the management must think of strategic
measures to bridge the gap.

5. Alternative strategies :
After making SWOT analysis and gap analysis management needs to prepare
(frame) alternative strategies to accomplish the organizational objectives.
It is necessary as some strategies are to be hold and others to be implemented.

6. Evaluation of strategies :
The management must evaluate the benefits and costs of each every alternative
strategy in term of sales, market share, profit, goodwill and the cost incurred on the
part of the strategy in terms of production, administration, and distribution costs.

7. Choice of strategy :
It is not possible to any organization to implement all strategies therefore
management must be selective. It has to select the best strategy depending on the
situation and it has to consider in terms of its costs and benefits etc.

C. Strategy Implementation :

Once the strategies are formulated the next step is to implement them. The
strategic plan is put into action through six sub processes known as project,
procedural, resource allocation, structural, behavioral, and functional implementation.
The project implementation deals with the setting up of organization. Procedural
implementation deals with the different aspects of the regulatory framework within
which organizations have to operate. Resource allocation relates to the procurement
and commitment of resources for implementation. The structural aspect of
implementation deals with the design of organizational structures and systems and
reorganizing so as to match the structure to the needs of strategy. The behavioral
aspects consider the leadership style for implementing strategies and other issues
like corporate culture, corporate politics, and use of power, personal values and

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 business ethics and social responsibilities. The functional aspects relates to the
policies to be formulated in different functional areas. The operational
implementation deals with the productivity, processes, people and pace of
implementing the strategies

For any strategy implementation there are five major steps.

Such as
1. Formulation of plans.
2. Identification of activities.
3. Grouping of activities.
4. Organizing resources.
5. Allocation of resources.

D. Strategic Evaluation:

Strategic evaluation appraises the implementation of strategies and measures

organizational performance. The feedback from strategic evaluation is meant to
exercise control over the strategic management process. Here the managers try to
assure that strategic choice is properly implemented and is meeting the objectives of
the firm. It consists of certain elements which are given below.

1. Setting of standards:- The strategists need to set standards, targets to implement

the strategies. it should be in terms of quality, quantity, costs and time. The standard
should be definite and acceptable by employees as well as should be achievable.

2. Measurement of Performance:- Here actual performances are measured in terms

of quality, quantity, cost and time.
3. Comparison Of Actual Performance With Set Targets:- The actual performance
needs to be compared with standards and find out variations, if any.
4. Analyzing Deviation And Taking Corrective Measures:- If any deviation is found
then higher authorities tries to find out the causes of it and accordingly as per its
nature takes corrective steps. Here some time authority may re-set its goals, objectives
or its planning, policies and standards.

Keywords

Environmental Analysis: Evaluation of the possible or probable effects of external as well as

internal forces and conditions on an organisation's survival and growth strategies.
Financial Benefits: profits associated with strategic management
Multifunctional Consequences: having complex implications on most of the functions of the
organisation
Non-financial Benefits: intangible benefits associated with strategic management
Non-Self Generative Decisions: decisions that are taken infrequently but promptly when needed at
any point of time

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 Plan: A set of intended actions, through which one expects to achieve a goal.
Strategic Choice: choice of course of action given the environment, mission and capabilities
Strategic Management: stream of decisions and actions that lead to development of effective
strategy
Strategy: A plan of action designed to achieve a particular goal.
Tactic: A conceptual action taken under a well defined strategy to achieve a specific objective.

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